Will This 1 New Catalyst Send Dogecoin to $1?

Key Points

• A handful of Dogecoin ETFs are being considered for approval.

• Some could be approved very soon.

• Don't expect this coin to follow the trajectory of Bitcoin or Ethereum after their ETFs were approved.

• 10 stocks we like better than Dogecoin ›

Dogecoin (CRYPTO: DOGE) is currently priced around $0.24, but there's one new catalyst that some investors are hoping will send it skyward, potentially by as much as fourfold, pushing its price to $1.

Let's take a look at what those investors are eagerly awaiting, and then judge how probable it is to actually juice the coin's price by as much as they want.

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What this catalyst could do

The catalyst in question is the potential approval of a spot Dogecoin exchange-traded fund (ETF), which could occur later this year.

There are several applications being considered by the Securities and Exchange Commission (SEC), which has generally this year opted to defer most of its crypto ETF approval or rejection decisions to October. In parallel, there could also be a Dogecoin ETF product that could debut even sooner, structured as a collection of financial derivatives tied to Dogecoin rather than spot holdings. The distinction is meaningful because it uses a different regulatory route to approval.

ETF access matters because it widens the top of the capital funnel. Many investors without any kind of dedicated crypto wallet will be able to buy Dogecoin through their normal investment account if the ETFs get approved.

Historical data shows that inflows after ETF approvals can be meaningful, but they vary widely by asset and timing. In their first year, spot Bitcoin ETFs attracted roughly $36.2 billion of net inflows during a period of strong sentiment. In contrast, U.S. spot Ethereum ETFs took many months to cross $4 billion in cumulative net inflows.

Dogecoin is highy unlikely to command Bitcoin-scale demand through an ETF, at least initially. It isn't as though Dogecoin has snappy branding like Bitcoin's reputation as digital gold. Its odds of eventually following Ethereum's ETF trajectory and marking big inflows more than a year after launch also seem improbable. A big part of Ethereum's success story on that front has to do with large technology upgrades that it made to bolster the strength of its network, and there's no equivalent story for Dogecoin.

Simply put, reputable financial institutions probably won't want to hold a meme coin, and certainly not in any appreciable quantity.

So, although an ETF could spark a one-off headline pop in the coin's price, a large gain that pushes the price past $1 would require persistent net buying that exceeds the coin's ongoing issuance and offsets selling by longtime holders who want to lock in profits. In other words, if the ETFs are approved, they will increase Dogecoin's price temporarily, and perhaps somewhat raise its price floor on a permanent basis, but it is not reasonable to expect prices to go to the moon.

An expanding supply won't help anything

There's another issue that an ETF approval definitely won't fix, but which investors need to understand. Supply mechanics matter, and they are not favorable here.

Today, Dogecoin's circulating supply is about 150 billion coins. About 5 billion new coins are created each year, roughly a 3.3% supply increase. That's an additional quantity of coins that must be absorbed by real demand to keep prices steady, let alone rise. It is fully possible that the inflows associated with newly approved ETFs could be a wash in terms of price appreciation due to the steady rise of the coin's supply.

Where does all of this leave investors?

It's acceptable to view a Dogecoin ETF as a convenience upgrade and a sentiment catalyst if it happens. There will probably even be some positive and durable effects on price. But a new ETF isn't an investment thesis on its own. And it especially isn't any substitute for a genuine value-generating mechanism, which the coin still lacks.

Therefore, there's nothing new coming up that makes Dogecoin into something worth buying. Avoid it.

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Alex Carchidi has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.