Can Dogecoin Reach $1? Yes, but only if that happens

Dogecoin (DOGE -0.30%) it might be one of the oldest cryptocurrencies around, but it is undoubtedly one of the most volatile on the planet. Just in 2024, it took its owners on a roller coaster ride.

As of this writing, this meme cryptocurrency is trading at about $0.10, about 86% from its all-time high of $0.74 per coin, which was set in May 2021. But can Dogecoin reach -a day for $1? It is possible, but only if this happens.

Increasing utility

The first obvious thing that could drive Dogecoin’s price up is if the currency’s utility gets a boost. At this time, DOGE can be used to tip users who post on Reddit. Bulls hope the same will be possible for social media platform X, as its owner Elon Musk has publicly expressed his opinion on crypto in the past. In total, Dogecoin can be used as a payment method at 2,594 different merchants. Nothing to write home about.

The fact that Dogecoin is his blockchain network as opposed to being compatible with Ethereum on the way Shiba Inu is, means it has limits in terms of its ecosystem of decentralized applications. And the fact that only 21 full-time developers are working on it, compared to almost 2,800 for Ethereum, does not bode well.

But if Dogecoin can somehow increase its utility, the demand for its native currency will increase. This is a key ingredient in the price increase.

However, in its 11-year history, Dogecoin has seriously lacked this. Its price movements are driven more by various hype cycles than anything related to fundamentals.

Offer reduction

Another catalyst that could propel Dogecoin’s price to new heights has to do with its structure. This is a key aspect that investors should be aware of in any cryptocurrency project.

Bitcoin it gets a lot of attention because it has a fixed power cap. It has a predetermined growth rate that enforces the long-term cap of 21 million coins (about 19.7 million are now in circulation). This element of scarcity is extremely valuable to some investors, which probably helps explain why the world’s largest cryptocurrency has a market cap of around $1.2 trillion.

Here is where Dogecoin seriously disappoints. There are now nearly 146 billion coins in circulation. It’s a huge amount. But to make matters worse, there are 10,000 coins added to the supply every minute. This means that in a full year, the supply expands by over 5 billion coins.

This unfavorable setup makes it extremely difficult to increase the price. Demand, already reduced due to lack of utility, must overcome an ever-expanding supply. This is not an ideal situation for investors.

If the Dogecoin developers implemented a coin burning scheme which has aggressively reduced supply, would be a step in the right direction. But there are no plans to do so.

Be realistic

Since the beginning of 2023, the cryptocurrency market has risen approximately 170% in value. At the same time, the price of Dogecoin increased by about 50%. This is a worrying development as it shows that even one of the most speculative tokens may not benefit as much as you might imagine during the industry’s bull run. It has underperformed the broader digital asset market.

While there seems to be a way to get to $1, namely by increasing utility and drastically reducing supply, I’m not very sure that this outcome is likely. Consequently, Dogecoin remains a very risky bet. Investors have more promising cryptocurrencies to consider buying instead.