What is Dogecoin? Learn all you need to know about this cryptocurrency.
Whether you’re new to cryptocurrency or have been following it for some time, you may wonder, “What is Dogecoin, and how does it work?”
In this article, we’ll answer those questions and give you general tips to help you decide whether or not you want to add Dogecoin (DOGE) to your crypto portfolio.
First, let’s see how cryptocurrency and Dogecoin fit into the current crypto marketplace.
Why Choose Crypto?
Cryptocurrencies are digital currencies underpinned by cryptographic systems — encryption algorithms and other “crypto” techniques. This encryption safeguards online payments and other financial transactions and makes the currency virtually impossible to counterfeit.
They are often based on blockchain technology, which enables a distributed digital database ledger to maintain a secure and immutable record of transactions without the participation of a third party.
In general, cryptocurrencies are not issued by or controlled by a central authority, such as a government. This means they cannot be manipulated by government fiscal policy.
While not commonly used for retail transactions, cryptocurrencies such as Dogecoin have become popular trading assets.
What is Dogecoin?
Dogecoin is an open-source peer-to-peer digital currency. It’s also an example of a cryptocurrency known as a “meme coin.”
Instead of being created to provide some specific functionality, meme coins draw on a theme — an internet meme or popular character — to establish an identity and attract attention.
In fact, Dogecoin’s creators — software engineers Billy Markus and Jackson Palmer — began it as a joke on the crazy speculation rampant in 2013. It featured the face of a Shiba Inu breed of dog featured in the internet “doge meme.”
While its inception was satirical, it gained traction and within weeks of its launch, a dedicated following had established a blog and forum on Dogecoin.
In 2021, Dogecoin benefitted from celebrity tweets from Elon Musk and others, sending its value soaring. This attracted the attention of mainstream audiences, giving Dogecoin some staying power.
Now that we understand what Dogecoin is, let’s take a look at its pros and cons.
No Third-Party Control
Because of its decentralized nature, Dogecoin is generally not subject to central control and manipulation and is difficult to counterfeit.
As with many speculative currencies, Dogecoin has historically enjoyed sudden episodes of incredibly high increases in valuation. Between January 28 and 29 of 2021, for instance, it soared 219%.
Considered the first meme coin, Dogecoin has been around for almost a decade. This means there are historical data and trends for users to consider before buying the token.
Large Supply And Low Price Per Token
Because of Dogecoin’s large supply and low price per token, it’s easier to buy and amass a large number of tokens. It also makes the currency suitable for online tipping.
A Dedicated Community
As we mentioned above, Dogecoin has a dedicated fanbase and online following. It touts a community that welcomes participation and the fun implied by the meme coin but is dead serious about supporting its success.
Potential Dogecoin Disadvantages
What goes up can come down. And anything that soars fast can plummet just as quickly. Some cryptocurrencies can be volatile, and meme coins in particular have a history of volatility.
Almost Unlimited Supply
With no ultimate limit on the number of Dogecoins that can be created, it is, by design, a highly inflationary cryptocurrency.
Limited Use Cases
Other than trading, Dogecoin’s chief use is for online tipping. In contrast to Dogecoin, many of the world’s most popular cryptocurrencies offer some or multiple forms of utility.
Affected by News Cycles
Dogecoin’s initial increases in value from community support were followed by a huge jump based on celebrity tweets. Historically, the price of Dogecoin has fluctuated based on how prominently it features in news cycles.
How To Determine If Dogecoin Is Right For You
Every crypto user is different — different needs, situations, risk tolerance, and investment objectives. Before deciding whether or not to buy Dogecoin, here are some things to consider.
1) Know Your Plan
Whatever your plan, figure out if Dogecoin should play a role in it — and, specifically, what role it will play. This will help determine how much Dogecoin, if any, to purchase, rather than getting caught up in the hype.
2) Do Your Research
Before buying Dogecoin or any other cryptocurrency, do your research.
In this article, we’ve learned what Dogecoin is, and that’s a great start. But getting a deeper understanding of how cryptocurrencies work and how Dogecoin relates to the available coins on the decentralized market will help you best execute your overall strategy.
Here’s some help from our blog as you dive deeper:
- How to Perform Technical Analysis for Bitcoin and Other Cryptocurrencies
- How to Spot Common Crypto Scams and Stay Safe Online
- Bitcoin and the Stock to Flow Model
- What is Dollar-Cost Averaging (DCA) and is it even worth it?
3) Set Limits
A crucial part of your investment plan is determining how much to invest in a particular asset and how long to hold it. This especially applies to Dogecoin or any other crypto.
Setting limits will guide you when you want to buy, sell, or figure out the extent of losses your portfolio can handle and when to take profits.
Diversification can lessen risk by ensuring you’re not too heavily concentrated in one type of investment. This especially applies to cryptocurrency.
By investing in a variety of tokens, your portfolio has the potential to be more stable should a particular token in your digital wallet start to drop.
5) Automate Buying And Selling
Everyone wants to buy low and sell high. But doing so successfully requires a lot of hard work, screen time, luck, and timing, which can be stressful.
You can save time and alleviate the stress of timing your purchases by setting up recurring buy orders — for example, $100 worth of Dogecoin — every month, regardless of the price.
This approach is known as “dollar cost averaging.” This simply means you’ll purchase more tokens when the currency’s price is low and fewer when the price is high.
Dollar cost averaging reduces the risk of making a single large purchase when the price is at an apex, only to see its value moderate.
Overall, this consistent automated approach nets more of a cryptocurrency than you could bring in by trying to time the market and place orders all at once.
How To Buy Dogecoin
Now that we’ve discussed the different aspects of Dogecoin and potential investment strategies, let’s dive into how to buy this token.
1) Create An Account
Once you’ve researched platforms and asked the right questions to see which one is best for you, create an account on a crypto platform, such as Binance.US.
Doing so allows you to convert fiat currency (e.g., money backed by a local government or bank, such as U.S. dollars) into Dogecoin.
Look for a platform that offers features that benefit your overall strategy.
Consider the platform’s:
- Selection of tokens
- Trading fees
- Other advanced features, such as recurring buy orders and real-time order books
2) Fund Your Account
To buy Dogecoin, transfer funds from a traditional bank account to the platform account you created in step one.
Most platforms offer a variety of ways for you to fund your account, including:
- Wire transfer
- Debit card
- ACH (from a bank account)
- Credit card
Before you sign up, it’s best to make sure the platform you’re partnering with offers the funding method you want.
3) Choose When To Buy
Finally, choose when to buy.
Remember that investing is ultimately all about timing. So, it’s imperative to monitor the market according to your investment strategy.
Buying Dogecoin With Binance.US
With the right tools at your disposal, a platform you can trust, and a deeper understanding of what Dogecoin is, you can successfully navigate the world of cryptocurrency.
You can buy DOGE, BTC, ETH, and over 100 other cryptocurrencies with bank transfer (ACH), debit card, or wire transfer. Start your crypto journey today.
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