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Evening Standard
Evening Standard
Business
Mark Hooson

Dogecoin (DOGE) price predictions: What’s on the horizon?

No token exemplifies the volatility of cryptocurrencies better, perhaps, than Dogecoin (DOGE).

The memecoin - conceived as a parody of cryptocurrencies - was worth around half of one pence at the time of writing, down almost 90% from its peak of 46p in May last year.

But DOGE has been as much a victim of 2022’s so-called crypto-winter as any other token. The slump this spring also tanked the values of bitcoin (BTC), Ethereum (ETH), Cardano (ADA) and many others.

DOGE prices are affected by supply, demand, competition and, in particular, sentiment. We’ve taken a look at the four key pressures to predict what might happen to the value of DOGE in the short to medium term.

Remember that cryptocurrencies are speculative investments where all your capital is at risk, meaning you might lose all your money.

Cryptocurrencies are unregulated in the UK and you will have no recourse to compensation if something goes wrong.

Supply

Unlike BTC, DOGE was created with no hard cap on the total number of coins that could be minted. However, the supply was not originally meant to be infinite either.

The developers of DOGE intended for there to be around 100 billion coins in circulation at any one time, with rewards for miners adding a block to Dogecoin’s blockchain fixed at 10,000 DOGE.

Dogecoin creator Jackson Palmer believed that, because of the rate at which wallets are lost and coins are otherwise destroyed, the reward amount of 10,000 DOGE would maintain the asset’s total circulation target of 100 billion DOGE.

It didn’t work.

The 100 billion limit was removed in 2014, just over a year before the number of DOGE minted surpassed the target. As of June 2022, there were an estimated 132 billion DOGE in circulation.

Proponents of fixed supply currencies argue their manufactured scarcity increases the value of the asset over time. Critics argue that they encourage hoarding, which limits a currency’s potential for mainstream adoption, and may decrease its value.

Dogecoin has found itself on both sides of that argument during its lifetime.

But even though DOGE now has an unlimited supply and should fall in value, demand will play a big role in determining what happens to prices in future.

If there’s not enough demand for the DOGE being infinitely minted, prices could fall. If demand outstrips the rate at which new coins are minted, prices may rise.

Demand

Dogecoin started as an inside joke based on a meme featuring a Shiba Inu dog surrounded by text in the comic sans typeface.

Some of DOGE’s growth can be attributed to investors getting in on the joke simply because they thought it would be funny if the token became a serious player in the market - and then it did.

A string of celebrity endorsements from the likes of rapper Snoop Dogg, KISS bass player Gene Simmons and Tesla/SpaceX founder Elon Musk have spurred some of DOGE’s biggest gains by generating demand.

For example, Elon Musk announced in a tweet in May that people would be able to buy SpaceX merchandise with DOGE, just as they already could Tesla merchandise. The value of DOGE immediately went up by around 10%.

Current DOGE demand can be gauged by the number of daily transactions being carried out in the token. Coin Metrics data shows there were around 28,000 DOGE transactions on 29 June, which is the highest it’s been since around March. That’s still a far cry from its December 2013 when there were around 200,000 transactions per day.

Google searches for ‘Dogecoin’ peaked in May last year. Today, search interest is as low as it was back in 2018, potentially signifying a loss of interest in the cryptocurrency.

The number of active DOGE addresses can give us another indication of demand. At the time of writing, there were roughly 70,000 active Dogecoin addresses, according to Glassnode data. In March of 2022, that number was briefly as high as 748,000.

Competition

DOGE is the 10th largest cryptocurrency by market capitalisation, putting it behind the likes of Bitcoin, Ethereum, Tether and Solana. DOGE’s closest memecoin competition comes from Shiba Inu (SHIB), which has a market capitalisation of around £4 billion against DOGE’s £7 billion.

DOGE lost more than 50% of its value between the beginning of May and mid June as the so-called ‘crypto-winter’ took similar bites out of currencies across the entire market. Bitcoin also lost 50%, while Ethereum lost around 70%, meaning DOGE’s loss wasn’t its competitors’ gains.

Sentiment

Few cryptocurrencies can boast the same calibre of celebrity backing as DOGE, but while a single tweet can cause its value to surge, the opposite could happen if a high profile name were to withdraw their support for DOGE.

Earlier this month, a DOGE investor filed a lawsuit against Elon Musk in Manhattan, accusing him of using his public profile to manipulate DOGE prices for profit and seeking £210 billion in damages. The news coincided with a slight dip in DOGE prices, followed by a period of rising prices.

Investors use fear and greed indices to measure market sentiment. When an index indicates fear, investors are selling their holdings because they anticipate prices are about to fall. When an index indicates greed, investors are holding on to their assets because they expect prices to rise.

The widely-cited Crypto Fear and Greed Index at alternative.me has shown the crypto market as a whole to be in an extreme fear phase for the past month, as crypto holders offload their assets. This sentiment could be reflected in falling DOGE prices.

Expert opinion

Crypto Consultant to eToro and author Glen Goodman thinks the fate of DOGE depends on what Elon Musk does in future.

Mr Goodman said: “Dogecoin’s future depends almost entirely on the whims of the world’s richest man. It’s Elon’s crypto plaything. Yes, it was invented as a joke, and Elon loves that aspect of it, but he’s also serious about his support for the currency.

“If his purchase of Twitter goes through, he intends to integrate crypto payments into the app, and no doubt that will include Dogecoin. That aspect is probably more significant than all the hype he’s created around DOGE. Musk is one of the few people with the sheer muscle to force crypto payments into the mainstream.

“The main criticism made of Bitcoin is that you can’t buy your daily cup of coffee with it. He has the power to make Dogecoin the first cryptocurrency to be used primarily for regular everyday payments, and that would be revolutionary. On the other hand, maybe he’ll just lose interest, because that’s Elon.”

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