Should You Invest in the New Dogecoin Spot ETF?

There's a new way to invest in Dogecoin (CRYPTO: DOGE) these days, without the need for managing your own crypto wallet. Regulators recently approved multiple exchange-traded funds (ETFs) tracking the speculative cryptocurrency. By making Dogecoin more accessible to the average investor, it could lead more people to hold it in their portfolios.

For current Dogecoin investors, that's the hope anyway. This year, the meme coin has plummeted by a whopping 55% (as of Dec. 2). Could the launch of Dogecoin spot ETFs be what sends it back up, and is now a good time to invest in it?

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Trading volume is down for Dogecoin, despite ETF approval

Although approval of multiple spot ETFs might technically make it easier to buy Dogecoin, that doesn't mean that investors are rushing to buy the cryptocurrency. In fact, trading volume for the digital currency remains down compared to the beginning of the year.

The first spot ETF began trading last week, the Grayscale Dogecoin Trust, and there wasn't a huge surge in trading for the meme coin as a result of that. From Nov. 24 to Nov. 26, just before Thanksgiving, trading volume for Dogecoin totaled just under 5 billion coins, averaging a little less than 1.7 billion over those three days. At the beginning of the year, it wasn't uncommon to see Dogecoin's volume more than double.

It is still early days after the ETF approvals, and there may be an uptick in trading in the days and weeks to come. But the initial indication is that these developments may not prove to be the catalysts that investors may have been hoping for -- and that's for good reason.

Dogecoin isn't any less risky as an investment

Being easier to invest in the cryptocurrency doesn't mean that it's less risky to hold Dogecoin in your portfolio. It's a highly speculative asset, and it's essentially a guess about where it may go in the future. It's been in a brutal tailspin this year, and I think that's mainly due to its sizable run-up in value last year; in 2024, it soared nearly 250%.

However, the vast majority of those gains came after Donald Trump's presidential election win. Dogecoin's rise in popularity may have simply been due to Elon Musk's close relationship with Trump and the Department of Government Efficiency, which he was behind, and which had an acronym related to Dogecoin -- DOGE, the same as the crypto's market ticker. However, Musk is no longer involved with DOGE, and it has been quietly disbanded ahead of schedule. Unsurprisingly, the meme coin has also become less popular.

When an investment seemingly rises due to such speculative and unrelated reasons, it highlights just how much risk, volatility, and uncertainty come with it. To make matters worse, there have been multiple crypto-related initial public offerings (IPOs) this year, which may have stolen the spotlight from Dogecoin. Plus, stablecoins have been emerging in popularity and offer investors a less risky way to invest in crypto.

Investors shouldn't expect Dogecoin ETFs to turn around the meme coin's fortunes

Dogecoin's success hinges on its popularity in the crypto world. And if that hasn't gotten a boost due to the launch of spot ETFs, which is good news for the coin, that could be proof that it has firmly fallen out of favor with cryptocurrency investors. It's still early, but it's a concerning sign nonetheless.

Ultimately, this remains an extremely high-risk investment, regardless of how much excitement there may be around Dogecoin. With so many digital currencies to choose from with more practical uses than Dogecoin, there isn't a compelling reason to take a chance on the meme coin today. You're likely better off just avoiding Dogecoin and any related ETFs entirely and simply pursuing growth investments that have much more upside in the long run.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.