Cryptocurrency is the new topic of discussion in the global economic arena, especially since Dogecoin started making headlines recently, fuelled by Tesla CEO Elon Musk. He also announced that Tesla would receive payments in cryptocurrencies from Tesla car buyers. This certainly fuelled the latest cryptocurrency boom and Dogecoin became an even bigger name than Bitcoin, which is the most popular cryptocurrency so far.
Its sudden rise has made crypto investors and harvesters wonder whether Dogecoin is going to be the next big thing in the cryptocurrency world. However, the spiral fall of the Dogecoin a few weeks ago, along with other cryptocurrencies like Bitcoin and Ethereum, pointed to its inherent weakness. It can be safely assumed that Dogecoin will likely remain an alternative cryptocurrency after the two major cryptos, which are Bitcoin and Ethereum.
The reasons include that Dogecoin, which is currently the 14th largest crypto in terms of market capitalisation, is likely to have a much wilder ride, meaning a much higher volatility than its two other crypto rivals. Market capitalisation along with volatility and differences in supply are two major factors that will define whether Dogecoin will be the next big thing in the crypto world or not.
A cryptocurrency’s market capitalisation is the total number of coins mined and available. Dogecoin is currently around 0.66% of the size of Bitcoin and 3.36% of the size of Ethereum. However, the higher volume of trading for Dogecoin is probably driven by its high volatility. This means, Dogecoin has a higher risk of losing the investment, as well as a higher chance of return as well.
Talking about the supply issue, Dogecoin has an inflationary controlled supply with around 5 billion coins released each year through mining, which can go forever. By contrast, Bitcoin has a deflationary supply structure, as only 21 million Bitcoins can ever be mined, meaning less than 2.64 million more Bitcoins can be mined, which is only 12.57% of its total supply. Talking about Dogecoin, its supply will fall over time.
So considering the risk and reward scenario, people who are considering investing in Dogecoin can do so only as a diversification investment option among other crypto coins.
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