Investors are back on the cryptocurrency train. Enthusiasm for cryptocurrencies is at its highest levels since early 2021, when the recent bull market peaked. How can you say that? Simply pull up the price chart of any cryptocurrency, and you will see the recent rise.
According to Yahoo! Finance, digital asset funds such as Black stone's iShares Bitcoin Trust ETF We are seeing record inflows of money from investors. Demand for Dogecoin (Crypto: DOGE)which is arguably the first meme coin, has skyrocketed.
The token is trading at $0.17 per coin, which is a significant rise from its 52-week low of just $0.06.
Of course, the question is whether this can and will continue. The answer may surprise you, but it comes with an important caveat.
Here is what you need to know.
Could Dogecoin price reach $0.50 this year?
To cut to the chase, Yes. Dogecoin can reach $0.50. Why? Because he's done it before. Dogecoin surged to over $0.68 in 2021 at the peak of the cryptocurrency's latest bull market. It was driven by a frenzy of speculative investors and billionaire Elon Musk, who began backing cryptocurrencies on his social media platform, X.
To be fair to Dogecoin, there are technical attributes to cryptocurrencies that give it some substance. For example, Dogecoin is a decentralized currency and operates on a peer-to-peer network such as Bitcoin Do. It can also handle much more transactions per second than Bitcoin.
However, the token was never likely to become a mainstream financial asset. The creators of Dogecoin intended it to be a fun way to build community, and this shows in some of Dogecoin's features. For example, Dogecoin has no maximum supply, which will work against the price of each token over time.
How much will Dogecoin rise?
The ever-increasing supply of Dogecoin is a deceiving factor in knowing how much upside Dogecoin might have. According to global data, Dogecoin's market cap peaked at $88 billion in 2021 when Dogecoin was worth $0.68 per token. Today, at $0.16, Dogecoin has a market cap of $24 billion. In other words, if Dogecoin traded at $0.68 per coin again, the resulting market cap today would be $102 billion.
This is 16% higher because the supply of tokens has increased so much over the past three years. So, hitting $0.57 today would be equivalent to a three-year high. If you're trading Dogecoin, keep in mind how much the value of the token will dilute as supply grows.
Without widespread adoption, which Dogecoin lacks (as is the case with most cryptocurrencies today), the price of the token will depend entirely on short-term buyer sentiment. This makes a token like Dogecoin inherently risky because you can't predict how high sentiment can take Dogecoin or when sentiment centers and the craziness ends.
Here is your game plan
Whether it's Dogecoin or any other cryptocurrency, cryptocurrencies are becoming increasingly popular in young investors' wallets. According to research by The Motley Fool, more than 40% of millennials own cryptocurrencies. The growing popularity of cryptocurrencies is exciting, but investors must invest responsibly. It remains a remarkably volatile asset class and should be treated like any other speculative investment.
This means making it a smaller percentage of your total investments. Build a strong foundation of assets such as high-quality stocks and ETFs, and consider adding cryptocurrency investments as a complementary asset for the upside.
Dogecoin could continue to rise, but no one knows how long it will last. Don't be shy about cashing in if you make a quick buck. Remember that Dogecoin's long-term mechanics do not support high prices, so buying and holding can easily backfire.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Will Dogecoin ride the cryptocurrency revolution and reach $0.50 in 2024? Originally published by The Motley Fool
