Dogecoin is an extremely volatile crypto, as its price moves based on unpredictable hype cycles.
Past returns can draw attention, but true investors should avoid buying Dogecoin.
It's best to identify cryptocurrency investments that provide real-world value.
It's crazy to believe that a cryptocurrency that started out to be a joke, compared to Bitcoin (CRYPTO: BTC), has transformed into a valuable blockchain network. But this is exactly what Dogecoin (CRYPTO: DOGE) has done. As of Sept. 8, it sports a market cap of $35.4 billion, putting it 8th on the crypto power rankings in terms of total market value.
Despite its extreme levels of volatility, this meme coin has skyrocketed over the long term. If you'd invested $10,000 in Dogecoin five years ago, here's how much you'd have today.
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You'd likely struggle to find any asset that produced a better return than Dogecoin. This crypto has soared 7,570% just in the past five years and would have turned a $10,000 starting capital outlay into a whopping $767,000 today. Bitcoin, the oldest and most valuable digital asset, is up 979% in the same trailing-five-year period.
However, it hasn't been a smooth ride. Dogecoin currently trades 69% below its peak, which was established during the crypto bubble of early 2021. Investors can expect the wild swings to continue in the future.
The entire cryptocurrency market can still be characterized by a speculative frenzy, where traders are looking to get rich quickly. This is particularly true when it comes to a meme token like Dogecoin.
Its price moves solely based on various hype cycles, as the crypto provides no real-world utility. Bitcoin was designed to manage cash value in a digital form, and Ethereum (CRYPTO: ETH) offers automated contracts. Doescoin was meant as a joke, and that never changed.
The price moves aren't predictable, so investors should stay away or keep their Dogecoin investments small unless they want to risk financial ruin. When looking for crypto additions to your portfolio that can be held for five or 10 years, it makes more sense to focus on proven winners like Ethereum or Bitcoin.
Before you buy stock in Dogecoin, consider this:
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.