Despite starting off as a joke, it's easy to see why many investors refuse to forget Dogecoin (CRYPTO: DOGE). With prices up by 7,000% during the past five years, the meme coin is clearly capable of minting plenty of millionaires in the right conditions. And with high-profile support from prominent figures like Elon Musk (who frequently mentions it to his 228 million X followers), the asset is never far from public attention.

Still, Dogecoin remains a meme coin. And that fact is reflected in its development team, investor community, and even its design. Let's dig deeper to see if this dog-themed cryptocurrency can overcome its challenges and deliver market-beating growth during the next five years.

A favorable macroeconomic outlook

For American investors, 2025 has been a bit of a wake-up call to the need to diversify into other currencies. While you can buy U.S. stocks, bonds, and real estate, if they are all denominated in dollars, they all could lose real value if the dollar itself falls relative to other currencies. The dollar index is down by about 9% year to date, essentially canceling out much of the S&P 500's 13% gain.

The U.S. faces relentless macroeconomic challenges like volatile trade policy, presidential threats to the independence of the Federal Reserve, and a national debt of $37.9 trillion, so this problem could get worse before it gets better. Foreign currencies are not necessarily a good alternative to the U.S dollar, because their governments often face similar problems with growth and political uncertainty. Plus, their equity markets have historically delivered dramatically lower returns than the U.S.

Cryptocurrency is potentially a much better option for investors who want to diversify out of the dollar while also enjoying the potential for market-beating gains over the long term. This trend has likely contributed to Dogecoin's recent stellar performance.

Dogecoin is still a meme coin

Meme coins are assets that were designed for humorous or highly speculative reasons. They don't attempt to push blockchain technology forward or pioneer real-world use cases. With a market cap of more than $28 billion, Dogecoin is far from a joke, despite its origins. But unlike more mainstream assets like Bitcoin or Ethereum, its performance is still often driven by social media and short-lived hype from influencers like Musk.

To be fair, all cryptocurrencies are inherently speculative because they don't have intrinsic value based on fundamental factors like revenue and earnings. But many of the large coins have managed to create more serious brands. For example, Bitcoin is seen by many as digital gold, while XRP has applied for a U.S. national bank charter. A perception of seriousness makes them more attractive to mainstream financial institutions, which can potentially lead to long-term success.

Image source: Getty Images.

Dogecoin's meme coin heritage also lives on in its design, which was intended to be a parody of Bitcoin. Unlike most large cryptocurrencies, which enforce scarcity through burning transaction fees or shrinking mining rewards, Dogecoin's supply is designed to continue growing.

While there is currently a circulating supply of 151.4 billion coins of Dogecoin, that number is programmed to expand by 5 billion each year. And while this design could boost liquidity and make the asset better for commerce and spending, it intentionally discourages long-term ownership.

Where will Dogecoin be in five years?

The future of the cryptocurrency industry looks bright over the next five years, especially as U.S. investors face an increasing need to diversify themselves out of dollar-denominated assets. That said, as a meme coin, Dogecoin's speculative nature and built-in supply growth could cause it to underperform more serious alternatives. And the asset only makes sense as part of a diversified cryptocurrency portfolio.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.