Dogecoin looks unappealing in a sea of Altcoins
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Elon Musk has been actively talking about cryptocurrencies. As I write on Dogecoin (CCC:DOGE-USD), musk tweeted this “EspaceX going to put a literal Dogecoin on the literal moon.
A tweet which could also imply that Dogecoin will rise further from current levels. The tweet sent Dogecoin temporarily rising, from 5.4 cents to 7 cents. Over the past year, Dogecoin has increased by 3,000%.
The rally is not a surprise. With Bitcoin (CCC:BTC-USD) moving higher, altcoins followed. I think Bitcoin is positioned for wider adoption in the years to come.
A recent Reuters article rightly points out that “after being long shunned by traditional financial firms, Bitcoin and other virtual currencies seem to be entering the mainstream more and more as an asset and a payment vehicle. routine ”.
However, I would personally be very selective when considering exposure to altcoins. And Dogecoin is not one of the names on my crypto shopping list.
Let’s discuss the reasons behind this point of view.
Dogecoin is just another digital currency
If we look at Dogecoin’s website, it is described as “an open source peer-to-peer digital currency”.
The question I’m asking myself here is: what makes Dogecoin special?
If I have to own cryptocurrency, I prefer to own Bitcoin. Fractional investing ensures that the Dogecoin price is not the differentiator.
It’s like saying the dollar is still the world’s reserve currency, but I would keep the Zimbabwean dollar in my wallet.
Bitcoin has a limited supply and this is one of the reasons crypto has risen. On the other hand, Dogecoin has 130 billion coins in circulation with no maximum supply limit.
Of course, Dogecoin is not as bad as the Zimbabwean dollar, but I personally prefer altcoins that have a limited supply in circulation.
Coming back to Musk, the founder and CEO of You’re here (NASDAQ:TSLA) actively promotes Dogecoin. However, Tesla bought $ 1.5 billion worth of Bitcoin in February 2021. Additionally, Musk also announced that the electric vehicle company will accept Bitcoin as a payment method.
However, there is no tweet or news about Musk buying Dogecoin or accepting crypto as a payment method.
This is the difference between Bitcoin and Dogecoin. The former is already at an inflection point for wider adoption. The latter looks more like a speculative coin than an alternative to fiat money.
Billionaire entrepreneur Mark Cuban tweeted last month that “If I had to choose between buying a lottery ticket and Dogecoin, I would buy Dogecoin. This tweet perhaps sums up my take on altcoin.
Of course, the speculative rally may continue for longer than expected. But holding a large position in Dogecoin would definitely disrupt my sleep. I would be more comfortable with the likes of Bitcoin and Ethereum (CCC:ETH-USD).
When it comes to altcoins, I would prefer to look at specific trading themes with a cryptocurrency. For example. Akash Network (CCC:AKT-USD) is a decentralized cloud computing market.
The decentralized world still uses the centralized cloud. Akash intends to change that and the company’s open source cloud is offered at a significantly lower cost than others. Microsoft (NASDAQ:MSFT), the alphabet Google (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN).
This is not an investment recommendation. It’s just the type of coins I would look at rather than exposure to another digital currency with a glut of supply.
It is important to note that valuations can be stretched in the cryptocurrency space. If Bitcoin corrects by 20%, there will be several altcoins that can dip from 30% to 50%. It’s more like high beta small cap stocks.
Therefore, my personal view is bearish on Dogecoin. If there is a strong correction, the coin can be a good trade bet. But I’m struggling to make a strong long-term case for altcoin.
As of the publication date, Faisal Humayun does not have (directly or indirectly) any position in any of the stocks mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of experience in credit research, equity research and financial modeling. Faisal is the author of over 1,500 stock-specific articles focusing on the technology, energy and commodities industry.
Dogecoin post looks unappealing in a sea of Altcoins first appeared on InvestorPlace.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.