If you had invested $ 100 in Dogecoin 8 years ago, here is how much you would have now

In a week’s time, we’ll be turning the page on what is sure to be another successful year for investors. The wide S&P 500 was 22% higher until Dec. 20, effectively doubling its average annual total return, including dividends, over the past four decades.

But the gains have been even more robust for cryptocurrency investors. With an aggregate market value of $ 2.2 trillion, the total value of all cryptocurrencies increased 184% in 2021.

Shiba Inu-themed pieces were incredibly popular in 2021. Image source: Getty Images.

Dogecoin has generated life-changing earnings since December 2013

Yet if you focus on the most popular digital currencies and expand a bit further, the payouts become even more impressive.

Take a coin Dogecoin (CRYPTO: DOGE) for example. Virtually all of the cryptocurrencies that used the Shiba Inu dog breed as inspiration or the face of their campaign performed exceptionally well in 2021. At one point, Dogecoin had gained around 27,000% in just six months from early November 2020. and early May 2021.

But the gains have been even greater for patients with DOGE. Looking back eight years, CoinMarketCap.com notes that a single DOGE token could be purchased for $ 0.0004512. But at the time of this writing, Dogecoin was trading hands for $ 0.1676. By eliminating three zeros, one of the most popular digital currencies on the planet gained over 37,000%.

To put that in context, if investors bought $ 100 worth of Dogecoin on December 22, 2013 and just stuck to periods of wild volatility, they would be sitting at $ 37,145 today. That’s a higher aggregate total return than the S&P 500 since early 1965 – and it took 48 years less to achieve that higher return.

Two divergent maps meet on a digital rocket ready to take off.

Image source: Getty Images.

Here’s what pushed Dogecoin over 37,000% higher

Many catalysts have ignited a fire under Dogecoin over the past eight years. However, most of its bullish momentum dates back to the past 12 months.

The clearest and most obvious catalyst for Dogecoin is the support of Tesla Motors(NASDAQ: TSLA) CEO Elon Musk. The self-proclaimed “Dogefather” is no stranger to tweeting Shiba Inu-themed memes that imply Dogecoin may “go to the moon”. Dogecoin just happens to be one of three cryptocurrencies currently owned by the richest person in the world.

Building on the previous point, Musk also tweeted that he would work with the developers of Dogecoin to improve the blockchain-based network and make it more competitive.

Dogecoin investors are also rallying around its growing utility. The Cryptwerk online business directory notes that nearly 2,000 merchants now accept Dogecoin as a method of payment. Additionally, DOGE is accepted for certain merchandise at Tesla and is one of a handful of crypto payment options available online at the Movie Channel. AMC Entertainment.

Fear of Missing Out (FOMO) also clearly plays a role. With crypto investors watching Bitcoin to catapult over 8,000,000,000% at one point in just over 11 years, they believe anything is possible. They are particularly drawn to DOGE’s psychological target of $ 1.

Finally, I would add that it is much harder to short sell lesser-known cryptocurrencies than it is to bet against Bitcoin or publicly traded stocks that have derivative trading options. With few channels to place downside bets on Dogecoin until recently, there was a natural buying bias in place which pushed its token price considerably higher.

A hand using a pin to pop a bubble containing a green dollar sign.

Image source: Getty Images.

Dogecoin is one of the worst cryptocurrencies to buy

While there were many factors that contributed to Dogecoin’s monumental run and online popularity, none of the aforementioned “catalysts” make DOGE worthy of your investment or its $ 22 billion market value.

The biggest problem with the most sought-after cryptocurrency in the United States is that it doesn’t have a competitive advantage or real differentiation. With nearly 16,000 cryptocurrencies now listed on CoinMarketCap.com, blockchain projects and payment coins will need features that allow them to stand out. People would like to think that hype counts as a characteristic, but history tells us that investing in emotions turns out to be fleeting.

Although Dogecoin’s average transaction fees are lower than Bitcoin’s and Ethereum, its fees are also considerably higher than virtually any other popular payment coin. With so many other crypto payment coins offering faster block finality and lower transaction fees than Dogecoin, it makes little sense for Dogecoin to be a priority addition for traders.

This lack of competitive advantage is clearly visible in the figures of Dogecoin traders. It has been eight years since its inception, and Dogecoin still has not reached 2,000 merchants willingly accepting its token as a form of payment.

But perhaps the most disturbing aspect of owning Dogecoin is what history tells us happens after some life-changing quick wins. Payment coins and network-based digital currencies that gained 24,000% or more or more in a short period of time apparently all fell 93% to 99% over the next 12-26 months after hitting their mark. peak. Dogecoin is already down 77% from its May peak, and history suggests it still has some way to go before it has any chance of finding a bottom.

Despite Dogecoin’s popularity and significant gains, investors should consider it to be one of the worst cryptocurrencies to buy for 2022 and beyond.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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