As part of a broader crypto rally in 2023, popular meme coin Dogecoin (DOGE 3.09%) is up 27.86% over the past 30 days. Naturally, this has led to hype and speculation that Dogecoin might be on a rocket ship to $1.
But just how realistic is that scenario? For one thing, in its nearly 10-year history, Dogecoin has never once hit the $1 mark. The all-time high for Dogecoin is $0.74, which it hit back in 2021, when billionaire Elon Musk was tweeting about the meme coin regularly. In order to reach $1, Dogecoin would need to increase in value more than tenfold, given its current price of $0.09. Here’s a closer look at some of the ways that might happen.
Twitter and Dogecoin
Right now, the primary catalyst for Dogecoin involves Elon Musk’s $44 billion acquisition of Twitter. If you look at the trading history of Dogecoin in 2022, sharp spikes in the price of Dogecoin were almost always accompanied by some bit of news coming from Elon Musk and Twitter. For example, when Musk finally closed the door on the Twitter acquisition in October, the price of Dogecoin spiked by 35%. And the pattern has been much the same in 2023, with Dogecoin offering no major catalysts of its own.
The hope of Dogecoin enthusiasts is that Elon Musk will find some way to integrate Dogecoin into a new Twitter payments system. Musk has said that Twitter is looking for ways to embed payments within the social media platform, and the speculation is that Dogecoin could play a role here. On that speculation alone, the price of Dogecoin jumped by 10% on a single day in January.
But I’m not so sure this payment integration is going to happen soon. Elon Musk specifically said that the new payments system would focus on fiat currency (i.e. U.S. dollar) transactions, and that crypto payments would be added later.
A shift to proof of stake
Another major catalyst for Dogecoin would be a transition from a proof-of-work blockchain to a proof-of-stake blockchain, something that has been often rumored. Right now, Dogecoin is the second-largest proof-of-work coin by market cap, trailing only Bitcoin (BTC 1.97%). This situation might be OK if Dogecoin has only limited aspirations for its blockchain, but if it ever wants to be a major blockchain player, it must transition to proof of stake.
Image source: Getty Images.
As we saw with the recent transition of Ethereum to proof of stake, there are innumerable advantages to this move. For one, it would dramatically improve the speed and efficiency of the Dogecoin blockchain. For another, it would enable staking, which is a way for investors to earn passive income by “locking up” their crypto for a predetermined time. Ethereum co-founder Vitalik Buterin has already championed Dogecoin’s move to proof of stake, and has even said that he would help in the transition process.
However, there appears to be an internal battle happening right now in the Dogecoin community. On one hand, some developers agree that the shift to proof of stake is the right way to modernize Dogecoin. On the other hand, Dogecoin has seen a lot of pushback. Dogecoin miners, for example, earn crypto by mining Dogecoin. So they have a vested economic interest in preserving the current proof-of-work system.
Other options for Dogecoin?
There are other ways for Dogecoin to build long-term value. One of them is to change the tokenomics of the coin. In layman’s terms, this simply means changing the coin’s circulating supply, or changing the rules for how coins are created or destroyed. Other meme coins, such as Shiba Inu (SHIB 2.02%), have succeeded with new coin-burning initiatives. By burning coins, you are removing them from circulation, thus reducing total overall coin supply. Over time, this should raise the price of the coin.
Right now, Dogecoin has very limited utility. Yes, you can use it to pay for items on a growing number of sites online. But apart from that, Dogecoin has never really been able to participate in the growth drivers of the modern blockchain economy, such as decentralized finance and non-fungible tokens. So Dogecoin needs to find a way to embrace these potential growth options.
That’s why I’m so frustrated with Dogecoin right now. It just doesn’t seem to want to be anything other than a silly, viral meme coin. Its future growth is now becoming so tied to Twitter that it might fade into obscurity if Elon Musk ever decides to abandon it. Until Dogecoin embraces a major growth catalyst, I cannot recommend Dogecoin. There are plenty of dog-themed meme coins out there, and I can’t even say that Dogecoin is the best one.