Dogecoin (CRYPTO: DOGE) was created in 2013 by two friends with the purpose of mocking the cryptocurrency industry. They believed that the market was becoming too serious and decided to use the image of the Shiba Inu dog from the famous 'Doge' meme to create the first humorous cryptocurrency.

However, this 'joke' quickly became a global sensation. In 2021, Dogecoin reached a market capitalization of over $90 billion as a wave of investors rushed in, hoping to make quick profits from the cryptocurrency craze. But like any other 'bubble', this excitement did not last long. By mid-2022, Dogecoin had lost more than 90% of its value from its previous peak.

Recovery Thanks to Politics and Elon Musk – But Only Temporarily

After struggling for several years, Dogecoin once again gained fame when Donald Trump won the presidential election last November. He promised to create an ideal environment for the cryptocurrency industry, with friendlier policies and less regulation. The price of Dogecoin surged nearly 200% after the election, reaching a 52-week high of $0.47.

Part of the motivation comes from the announcement that Elon Musk will head a new agency called the Department of Government Efficiency (abbreviated as DOGE), aimed at reducing wasteful spending. Although the name is reminiscent of Dogecoin, there are no specific plans to integrate or create real value for this currency.

Investor confidence quickly faded. Musk took no action to promote Dogecoin, and the token price is currently around $0.21 – down 55% from its recent peak.

The Biggest Problem: Unlimited Supply

The decline in influence from Elon Musk is just part of the reason. In fact, Dogecoin still faces more serious issues: a lack of real-world applications and unlimited supply. According to data from Cryptwerk, only about 2,103 businesses worldwide accept Dogecoin as a payment method – a figure that is far too modest compared to the scale needed for a cryptocurrency to create lasting value.

Worryingly, Dogecoin has no total supply limit. Currently, there are about 150.5 billion tokens in circulation, and new tokens are still being mined each year with no end date. This leads to perpetual inflation, diminishing the value of existing tokens and making it difficult to maintain long-term appeal for Dogecoin.

Meanwhile, Bitcoin – the most popular cryptocurrency in the world – has a total supply limit of 21 million coins. This scarcity gives investors the confidence to hold long-term, thereby helping the value of Bitcoin to appreciate over time.

Can Dogecoin Reach $1?

Many investors hope that one day Dogecoin will reach $1, but with a lack of scarcity and limited utility, this scenario is almost impossible. Previous price increases mainly stemmed from temporary excitement rather than solid fundamentals.

Therefore, Dogecoin may continue to attract those seeking fun in investing, but for those looking for sustainable growth and long-term value, this is perhaps a currency to stay away from.

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