Over the last decade, cryptocurrencies have embraced the wider market. As Bitcoin (BTC) tends to be the most popular currency in the crypto world, Dogecoin (DOGE), the so-called ‘meme-coin,’ has delivered one of the highest returns. Within just six months between November and May, Dogecoin has shown a 27,000% return! Too bad, but the Dogecoin dream seems not to last forever.
Since the peak at $0.74 on May 8, Dogecoin has lost about 75% of its value. Someone could call that decline of Dogecoin a normal pullback or a great opportunity to buy. But crypto analysts, as Sean Williams of The Motley Fool and Shivdeep Dhaliwal of the Benzinga, see this collapse as completely predictable.
Here are 12 disturbing reasons they said the ‘meme-coin’ is doomed to crash eventually.
1. Too few businesses accept Dogecoin.
Dogecoin has too limited usage in the real world. Excepting big crypto exchanges like Coinbase, just about 1,400 mostly small businesses worldwide accept Dogecoin as payment, as said in the business directory Cryptwerk. And it’s taken 8 years to reach such a ‘broad’ adoption.
2. Daily blockchain transactions tend to decline.
If in the period between July 2020 to May 2021, there are about 35,000 to 55,000 average daily transactions occurred, then in the last month, we can see only from 20,000 to 35,000 transactions daily. Comparing to Visa, which processes approximately 24,000 transactions per second, Dogecoin’s popularity seems greatly exaggerated.
3. Transaction fees are much higher than other major cryptocurrencies.
One of the core messages of the Dogecoin hype was that its transaction fees were much lower than Bitcoin and Ethereum. However, the truth is, Dogecoin’s transactions fees are also substantially higher than a number of other popular tokens, such as Stellar, Nano, IOTA, Litecoin, Cardano, Ripple, Monero, Bitcoin SV, Bitcoin Cash, Ethereum Classic, DigiByte, Dash, and much more. As well, many of these coins also verify and settle transactions quicker than Dogecoin.
4. Lack of competitive advantages.
As there’s no barrier to entry crypto space, we can see a seemingly endless flow of new cryptocurrencies and blockchain assets being introduced to operation. Thereby, the lack of obvious competitive advantages of Dogecoin makes its position uneasy.
5. Musk’s support lacked consistency.
Elon Musk’s tweets have been a driving force for Dogecoin. But absolute most of the ‘Dogefather’ tweets and memes concerning the coin had no substance behind them. Come to think Musk had changed his mind even on Bitcoin so many times before, so his wholehearted support for Dogecoin seems not such a convictive.
6. China’s crackdown.
The latest moves against Bitcoin show China doesn’t want any digital currencies competing with its digital yuan. This suggests that some governments won’t be friendly to digital currencies invading their economy. Considering the second-largest economy in the world, latest China’s actions have sent pessimistic waves over the crypto world.
7. High mining inflation constantly devalues ‘hodlers.’
The persistent token inflation caused by mining causes another problem for this cryptocurrency. DOGE supply rises by about 5 billion per year, against just millions for Bitcoin. In 2021, that’ll lead to circulating supply inflation of about 4%. That may not look much, but it’s been over a decade since the inflation rate in the U.S. topped 4%. That’s why Dogecoin holders (or ‘hodlers’ as they call themselves) are constantly feeling as their funds eroded by dilution.
8. Dogecoin’s weak decentralization.
Dogecoin fails one of the main tenets of cryptocurrencies – to ensure decentralization, which means that no small groups gain large control over a network. According to BitInfoCharts.com, just 95 addresses control over 66% of all outstanding tokens. If these Dogecoin whales quit, they can deeply sink the price of the people’s currency.
9. Margin is a big issue
The proliferation of leverage on cryptocurrency exchanges is yet another reason why Dogecoin was doomed to crash. Back in May, Bybt.com reported that a sudden drop in the price of cryptocurrencies triggered margin calls on more than 887,000 account holders, liquidating around $9.4 billion in crypto assets to cover debts. As margin can stretch investors’ profits, it can also amplify their losses if the timing was wrong. As brokerages allowing substantial margin usage on these highly volatile assets, it was just a matter of time before margin calls crushed those gambling on Dogecoin.
10. Safety concerns.
For the moment, the Dogecoin hashrate is 237.8 trillion hashes per second, while the Bitcoin hashrate is 97.706 quintillion hashes per second, according to BitInfoCharts.com data. The higher hash rate means a greater amount of computational power to maintain the blockchain, which makes it more difficult to take over or disrupt the network. Simply put, Bitcoin network safety is about 400,000 times much higher than DOGE.
11. Slow level-ups.
Since the last release of Dogecoin Core this February, the lack of development has been criticized by some as DOGE’s Github page has not shown much activity since 2017. Ethereum co-founder Vitalik Buterin said that there are “subtle technical factors” that limit Dogecoin scaling. Even though Musk said he was working with the Dogecoin developers on the “efficiency of system transactions” last month, it attracted serious discussions.
12. All bubbles have to burst.
History teaches us that each very bubble eventually bursts. No matter how investors are excited, the reality never matches pumped expectations. Blockchain technology might have a bright future, but businessmen not hurrying to throw away their old good payment infrastructure. Without clear competitive advantages, Dogecoin is just a pump-and-dump-based bubble that has to burst.
In addition, a widely followed pseudonymous cryptocurrency analyst and Bitcoin bull Tyler Durden has predicted that the price of Dogecoin is “programmed” to plunge to $0.05 and that even Elon Musk would be unable to save it.
Dogecoin was originally created in 2013 as a joke. The cryptocurrency community is well-known for taking on philanthropic projects, which included helping charitable organizations. It made headlines in 2014 after raising more than $25,000 worth of DOGE to let the Jamaican bobsleigh team attend the Winter Olympics in Sochi.
Over the past year, the cryptocurrency’s popularity exploded after several celebrities started tweeting about it. Musk, Kiss singer Gene Simmons, billionaire Mark Cuban, Snoop Dogg, and others have over time tweeted jokes about DOGE, fuelling its growth.
Year-to-date, the price of DOGE is up over 5,500%, even though the cryptocurrency is down by more than 60% from its all-time high.