When you consider that it’s based on hype rather than substance, it’s surprising Dogecoin (CCC:DOGE-USD) has held up after last month’s crypto crash. Or is it? Meme-driven investors who switched from stocks to crypto this spring have returned to their old “meme-stock” posts.
But there is still a bit of energy in this crypto, once dismissed as a joke. Not only that, its trading debut on Coin base (NASDAQ:COIN) probably helped support it as well.
Does this mean that Dogecoin is returning “to the moon”? Not so fast. In the short term, there could be enough in the game to keep it from falling below 30 cents. But the energy that’s still at play here won’t last forever.
At this point in time, this coin still seems like a passing fad. There could be another rally before all is said and done. But when it doesn’t take off like it did in April and May, many of those who hold it today will grow impatient and eventually throw in the towel.
The result? Perhaps no return to prices below 1 cent, which was what was traded for in early 2021. But certainly a double-digit decrease compared to today’s level (around 33 cents). Instead of gambling on that coin, consider investing in altcoins instead, which offer more long-term potential.
Dogecoin and its resilience after a crash
After last month’s collapse in the crypto market, names across the board struggled to recover. Bitcoin (CCC:BTC-USD) slides further. ether (CCC:ETH-USD) has achieved a similar mediocre performance despite the interest from BTC.
The so-called “Ethereum Killer” Altcoins like Cardano (CCC:ADA-USD), Polygon (CCC:MATIC-USD) and Solana (CCC:LEFT USD) have performed much better in the past few weeks, but so have Dogecoin, although they haven’t even come close to their level of functionality.
What’s behind this unexpected resilience? Some of this can be credited to the enduring power of meme energy, even when online speculators like “meme stocks” again AMC entertainment (NYSE:AMC), blackberry (NYSE:BB) and GameStop (NYSE:GME).
And of course, his Coinbase trading debut on June 3rd helped too. However, after a small pop had dropped back to as low as 44 cents before this development, it has since slipped back to what it was before this short-lived recovery. Put simply, there is enough enthusiasm to keep prices stable. But while I wouldn’t count it, it is nowhere near guaranteed that we will see another parabolic upward move.
Is there room for another Dogecoin rally?
Investors looking to “buy the dip” with Dogecoin are not doing so in order to make gradual profits. Chances are they’ll buy their way in today in hopes of securing a position before another To the Moon rally. Right now that seems like wishful thinking. But there are two ways in which another round of memetic frenzy could play out here.
For one thing, as I wrote on May 25, the influence of Elon Musk on DOGE USD prices could work in favor of this coin again. At the moment, his latest engagement (his plans to literally take it to the moon) is more of a publicity stunt than anything else. But if it were to actually put real effort into further development, such as facilitating upgrades, it could trigger a rebound to its previous highs.
Second, Musk or no Musk, the meme trading community could unexpectedly re-immerse themselves in them in a big way. If the final round of widespread short squeezing that has erupted in the past few days runs out of steam again, much of that retail money could flow back into this earlier “taste of the month”.
But while investor irrationality may once again benefit those who already own Dogecoin, it is not inevitable. Since its bull case is still based almost entirely on the “Greater Fool Theory” and not on its foundations, this coin remains little more than a game of chance today if it lasts for a long time.
Instead, focus on cryptos with long-term potential
For now, DOGE-USD could stay stable or, if the stars align, see one final short-lived rally. But while the irrationality has held, it will not stay that way forever. As investors realize that a new pool of investors will not emerge to buy them at a higher price, confidence will continue to decline.
As soon as those who are still holding it start on the way to the exits, a sharp fall in prices is to be expected. Again, maybe not back towards its 52-week lows, but likely way below what it’s changing hands today.
So, since this meme coin is falling rather than returning to its previous highs, what’s the best move? Other altcoins have their share of high risk. However, when they offer more substance and long-term potential, focus on them instead of Dogecoin.
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At the time of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He has held positions (neither directly nor indirectly) in the other securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s posting guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing individual stock analyzes for web-based publications since 2016.