Dogecoin (CRYPTO: DOGE) hasn’t escaped the broader sell-off that has occurred among technology companies and most cryptocurrencies. After years of optimism and soaring prices, the meme coin has dropped 47% over the past 12 months.
Crypto investors are in the same boat as many stock investors these days, trying to figure out where the market is headed and whether brighter days are ahead or if storm clouds are forming on the horizon.
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Here’s why Dogecoin owners may want to brace themselves.
If you look back over the past five years of Dogecoin’s price, you’ll see an astronomical spike in the coin’s value back in 2021. That jump occurred, in part, due to an influx of people receiving government stimulus checks, who were spending more time at home because of social distancing, and benefiting from low interest rates — all on top of a mass hiring spree by companies looking to retain workers.
In short, a lot of money was being thrown around, and some of it was used by investors buying Dogecoin. If you need proof of this, just consider that coin’s price surged 1,500% in 2021 alone.
There have been other spikes in Dogecoin’s value since then, but mostly, it’s been a roller-coaster ride. In fact, Dogecoin is down about 85% from its all-time high in May 2021 and, most notably, has failed to beat the S&P 500 over the past five years.
Dogecoin’s price moves almost entirely on sentiment. When investors are excited about it, the price goes up. When they’re not, it goes down. There is no revenue or earnings tied to the coin, and no differentiating technology that sets it apart from other cryptocurrencies.
Dogecoin also lacks exclusivity. Nearly 5 billion new Dogecoins are added to circulation every year, in contrast to some cryptos like Bitcoin, which has a total cap of 21 million.
When you add this all together, it becomes pretty clear that Dogecoin’s value relies heavily on optimistic crypto investors.
And they may be in short supply over the next few years.
Many economists recently increased the odds of a U.S. recession in the next year, with Moody’s Analytics providing the least optimistic prediction at nearly 49%. That’s more than two times higher than the recession odds at any given time.
