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DOGE Strengths +
- DOGE boasts tremendous network effects and "viral meme" status among younger traders.
- The Dogecoin project is a fork of Luckycoin which was derived from Litecoin, meaning the code has been meaningfully tested and reviewed.
- Due to its popularity, especially in 2020, DOGE is now listed on most top exchanges, providing substantial liquidity and trading volume to the asset.
- DOGE is merge-mined with Litecoin, meaning they share the same hashing algorithm and therefore (mostly) the same miners. This design decision made it easy for Litecoin miners to also mine DOGE, bolstering the network's security.
DOGE Weaknesses -
- While DOGE is a favorite among speculators, it is inferior to Bitcoin in nearly every conceivable fundamental aspect which produces a reliable, robust, and decentralized form of digital currency.
- DOGE has fewer nodes, users, volume, transactions, hash rate, miners, developers, merchant adoption, exchange listings, and wallets than Bitcoin.
- DOGE suffers from extreme wealth centralization. Eight large whales (individuals/entities who own large amounts of DOGE) control ~43% of the supply.
- Due to Dogecoin's 1 minute block times, latency issues among the distributed nodes have resulted in only ~60% of the network nodes syncing to the tip of the blockchain. This makes the network less reliable and harder for new nodes to join the network. Both result in a more centralized and fragile network.
- Dogecoin development has been stagnant since 2017 and has also seen the creators abandon the project.
Much of the hype around DOGE this summer has subsided. Without Elon tweets or TikTok challenges, DOGE doesn't have much to offer and so, unsurprisingly, the price suffers as pictured above. Even more telling may be the DOGE/BTC chart (below). Any alt coin crypto investor should be comparing their performance against BTC or ETH. It's not uncommon for alt coins to rise in dollar terms but one must consider the opportunity cost and risk in owning an alt coin versus simply holding a crypto "blue chip." It looks as if DOGE is hovering around a key level versus BTC. If BTC sees more downside in the near future, it can be expected that DOGE will see even greater losses as it breaks a key support level around 0.00000395.
If you have trouble reading all those zeroes in the chart, that is partly because of Bitcoin's tremendous success but also an intentional design choice by DOGE and other coins creators to have a smaller "sticker price" than other coins. This plays into investor's decisions and is called Unit Bias. Unit bias refers to crypto projects with an ENORMOUS total supply of coins, thereby making the price of a single currency very, very small. This bias matters because novice/unsophisticated investors see the negligible “price” and believe/feel that it’s “cheaper” than, say, Bitcoin at $65k. This phenomenon has happened many times in crypto, including:
- The long-held bias that Litecoin was “cheaper” than Bitcoin due to lower price tag
- XRP was a retail favorite in 2017, in part because it was the only token less than $1 that was listed on Coinbase in 2017
- Yearn.finance (FYI) dividing its token by 1 million, calling them WOOFYs, and momentarily doubling in total value in less than a week
- “DOGE to a dollar” movement earlier in 2020
- And now, DOGE, and to a greater extent SHIB
The idea that Bitcoin is “too expensive” because it costs thousands of dollars and some other coin is “cheap” because it’s less than a penny/dollar is nonsensical. Many traders have made lots of money preying on naive investors and the unit bias effect, but a project's “sticker price” is simply a gimmick and says nothing of its actual utility or value. Chasing meme coins can be a nasty habit, as our CORE report on DOGE warns. Buyers beware!
And remember, despite its longevity, it is well-known that DOGE was quickly copied/forked from another coin without much consideration beyond simply being a joke. This flippant, joking approach remains as there has been nearly zero active development of the project over the years.