Forget Dogecoin: Buy This Tech Stock Instead

Forget Dogecoin: Buy This Tech Stock Instead

Dogecoin (CRYPTO:DOGE) has been on fire lately. The price of a single token has skyrocketed by more than 3,000% in the last year, and it’s up by 25,000% over the last five years. Most assets never see those kinds of gains, but that doesn’t make Dogecoin a smart investment.

Cryptocurrencies in general come with great risk and volatility, and even among them, Dogecoin skews toward the riskier side of the spectrum. Rather than putting money into such a highly unstable asset, investors looking to cash in on the cryptocurrency craze should consider buying PayPal (NASDAQ:PYPL) instead.

Dogecoin: Tulip-mania

Despite its recent massive gains, there are several problems with Dogecoin. One, in particular, should give investors pause.

The potential supply of Dogecoin is infinite. Unlike Bitcoin, which will be limited to 21 million tokens total, there is no upper bound on the number of Dogecoin tokens that can be mined. As long as miners keep building the blockchain, more will be created. In fact, there are already 129 billion tokens in existence.

That’s a problem because eventually, the supply will exceed the demand. At that point, economic theory suggests prices will fall. To put that in context, precious metals like gold and platinum have high values because they are scarce. But what if gold and platinum were everywhere? They wouldn’t be worth much.

During one of the most famous market bubbles of all time, tulip bulb prices skyrocketed in Holland in the 1630s. Fueled by the overwhelming popularity of the flowers, at one point, a single bulb sold for as much as $750,000 in today’s money. Obviously, that didn’t last, and the so-called tulip-mania bubble burst after a few years.

The point is this: Just because the price people are trading Dogecoin at has increased by a factor of 30 in the course of a year, that doesn’t mean it’s actually worth anything like that much. Sometimes, people get carried away.

PayPal: A better buy

PayPal—unlike Dogecoin—offers a clear-cut investment thesis: Digital payments are becoming more popular with people and businesses around the world, and this fintech company provides the tools that consumers and merchants need to participate in the digital economy. As that trend continues to evolve, PayPal and its shareholders will be well-positioned to prosper.

Moreover, the company’s global network gives it a significant advantage over its rivals (another thing Dogecoin conspicuously lacks). As more merchants join its network, it becomes more valuable for all consumers, because they can spend the money in their PayPal accounts in more places. The same is true in reverse: As more consumers set up accounts on the network, it becomes more valuable for all merchants.

This network effect has driven significant growth for PayPal in several important financial metrics.

Metric 2017 2020 CAGR Active Accounts 229 million 377 million 18% Revenue $13.1 billion $21.5 billion 18% Free Cash Flow $1.9 billion $5.0 billion 39%

PayPal is also establishing itself as a key player in the cryptocurrency economy. Last year, the company announced that users would be able to buy, sell, and hold cryptocurrencies like Bitcoin directly from the PayPal and Venmo apps.

More recently, PayPal launched its Checkout with Crypto service, enabling consumers to fund their purchases with cryptocurrency. And eventually, it plans to bring this functionality to all of its 29 million merchants. That makes it the first major payment processor to directly power cryptocurrency transactions.

If cryptocurrencies truly become mainstream, PayPal should benefit in a big way. But even if they recede into a small niche market or disappear completely, it will still have a thriving business. In other words, this fintech company is a safer investment than Dogecoin, yet it still offers the potential for big gains. That’s why investors should consider adding PayPal to their portfolios.

Good Bois Welcome: This Nashville Boutique Hotel Accepts Dogecoin

The Conversation

Whether just comfortable at home or nervous about leaving, kids may need extra support to get back out there. Imgorthand/E+ via Getty ImagesPilar’s parents took all the recommended precautions to shield her from the dangers of COVID-19. They stayed at home, away from family, friends and group activities. Pilar had remained in virtual schooling throughout the pandemic as a first and then second grader. As things began to open up again and her grandmother received the COVID-19 vaccine, Pilar’s parents began to hear a new signature phrase from her: “I don’t want to go.” Not to her gymnastics class, not to the grocery store, not even to the outdoor patio of her favorite restaurant. After all the events of the past year, 7-year-old Pilar was apprehensive and worried about reengaging with the world outside her close-knit family. With the return to in-person school looming, Pilar’s parents were at a loss. As researchers and clinicians who work directly with children and families experiencing anxiety, we have heard many versions of this story as the U.S. enters a new stage of the coronavirus pandemic. For some children, avoiding others has become understandably normal and the path back to pre-pandemic interaction may feel like a challenge to navigate. Feeling stressed is normal these days The pandemic led to abrupt and extended changes to families’ routines, including more isolation and removal from in-person schooling, that are associated with worsening mental health in young people. Since March 2020, there’s been a significant increase in reported youth anxiety, particularly in relation to fears of the coronavirus, along with greater frustration, boredom, insomnia and inattention. Results of a survey from summer 2020 found that over 45% of adolescents reported symptoms of depression, anxiety and post-traumatic stress. Parents are also struggling emotionally. Adults report increased symptoms of depression, especially those experiencing high levels of anxiety related to risk of coronavirus exposure or infection. Parents are at even greater risk for psychiatric illness, with many reporting less personal support since the arrival of COVID-19. Parents must juggle the demands of work, home management, virtual schooling and child behavior during this time of prolonged isolation. The majority of people are able to adapt to new and stressful situations, but some experience severe and extended psychological distress. So, what can parents do to care for both themselves and their children as we gradually transition back to interacting in public? Healthy precautions are important, but be on the lookout for behaviors and worries that seem to be going overboard. damircudic/E+ via Getty Images Worried about catching COVID-19 out there As children and adolescents begin to leave isolation and return to public spaces, they might worry more about becoming sick. Of course it’s entirely reasonable to have concerns about health and safety in the midst of an ongoing pandemic. Parents can listen to children’s worries and express understanding about them in a brief and age-appropriate way. But parents should also pay attention to how intense these worries seem to be. Is your child getting caught up in excessive hand-washing and cleaning? Adamant about avoiding even public spaces that you deem safe? With kids who are struggling, parents can discuss the differences between appropriate and excessive safety precautions. Remind your child that while it’s important to be safe, it is also important to adapt your safety strategies to new information and situations. Drawing distinctions between what you and your children can and cannot control when it comes to getting sick, limiting excessive reassurance about safety and having a plan to manage challenging situations as they occur can help your child feel ready to meet the world. Not ready to socially reengage Throughout the pandemic, some children have continued to attend school in person, while others have conducted most of their learning online. During the transition back into in-person environments, different people will adjust to engaging with others at different speeds. For kids expressing worry about resuming face-to-face social interactions, parents can help ease the process by expressing empathy simply and clearly. This hasn’t been an easy time for anyone. Assist your child in taking smaller, more manageable steps toward regular interactions. For example, your child may not feel ready to spend time with friends indoors, but they may feel comfortable meeting one pal at an outdoor park. This first step can get them started down a path to participating in additional activities with more friends or in more settings, where safe and appropriate. Setting incremental goals can help children feel more in control about facing uncomfortable situations where their initial response may be to avoid. While it may feel easier in the moment to accommodate your child’s desire to avoid social situations that feel more awkward or overwhelming than before, it is important not to reinforce such behavior. Prolonged avoidance can lead to even more anxiety and less confidence in socializing. Instead, acknowledge that engaging with others can feel hard when you’re out of practice. Help your child think about ways they’ve successfully coped with similar worries in the past. For example, you might ask how they handled adjusting to kindergarten when it felt new and different for them. What did they do then that felt particularly helpful for coping? If they’re assuming the worst about upcoming contact with others, encourage flexibility and help them develop more realistic expectations. In so many cases, the anxious anticipation is much worse than the reality of a dreaded social interaction. Maintaining some of the enjoyable parts of your locked-down routine can help ease this transition. xavierarnau/E+ via Getty Images Resistant to a busier, more active schedule For many families, the rise of the COVID-19 pandemic cleared calendars that were usually packed with obligations. Some kids might have welcomed a slower pace or gotten cozy with the more low-key bubble lifestyle. Now the shift back to a more active schedule might feel overwhelming. If your child is having trouble handling the loss of downtime, work with them to strike their own version of “work-life balance.” Help your child create new routines that incorporate regular meals, good sleep hygiene, necessary breaks and organization around completing schoolwork. These steps can establish more structure where it may be lacking and help ease the burden. [Get the best of The Conversation, every weekend. Sign up for our weekly newsletter.] Remember to make new or renewed activities as fun as possible to promote buy-in from family members. While things will most certainly get busier, maintaining positive one-on-one or family time with your child will help them feel supported as they move into this next stage. The good news is that many children like Pilar are highly resilient and recover well from difficult circumstances. The COVID-19 pandemic is something kids have been coping with, in some cases, for much of their young lives. It may take time and patience, but with positive support, even more anxious kids like Pilar can ease their way back to a comfortable, confident “new normal.”This article is republished from The Conversation, a nonprofit news site dedicated to sharing ideas from academic experts. It was written by: Dominique A. Phillips, University of Miami and Jill Ehrenreich-May, University of Miami. Read more:How can all schools safely reopen?10 parenting strategies to reduce your kids’ pandemic stress Jill Ehrenreich-May receives funding from The Children’s Trust, Upswing Fund, Ream Foundation, PCORI, and the National Institute of Mental Health.Dominique A. Phillips does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Inflation and Influencers: How Investors Can Send Dogecoin to $10

So much wow. When Billy Markus created Dogecoin (CCC:DOGE-USD) in 2013, he did so as a joke. DOGE’s mining reward system was so ludicrously structured that no one could possibly have taken it seriously; at the start, miners could earn anywhere from zero to 1 billion coins for completing a single block.

Dogecoin Cryptocurrency

Source: Orpheus FX / Shutterstock.com

But Dogecoin holders have had the last laugh. Today, the cryptocurrency is worth almost $10 billion and has one of the most dedicated followings of any tradable security. Lucky investors could have turned a $1,000 initial stake into nearly $1 million.

Core to this success was a 2014 technical change that developers quietly made, although celebrity endorsements helped. At block 145,000 – the coin switched from its random mining reward to a consistent payout; miners now earn just 10,000 DOGE per reward. That move capped today’s inflation at 5.256 billion coins per year and removes the joke that initially made the cryptocurrency unusable.

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Renewed interest in Dogecoin’s development could spark even more changes. If its inflation trajectory changes again, DOGE at $10 might become a reality.

Why Are DOGE Prices Stuck Around 6 Cents?

Cryptocurrencies typically fall into three groups:

Inflationary: a supply that goes up indefinitely (i.e., Dogecoin)

Deflationary: a limited supply (i.e., Bitcoin)

Pegged: a supply that changes to match USD or another underlying asset (i.e., Tether)

Today, Dogecoin lives life as an inflationary coin. Much like fiat currencies, more gets minted every day. And just like its government-backed counterparts, Doge’s upside remains limited because buyers know they can always acquire more later. (For a real-world example, consider that the EUR/USD exchange rate of 1.2 is virtually the same as in 1999). In other words, when your currency adds 4% supply every year, it will eventually find a price equilibrium with other 4% growth currencies.

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Meanwhile, Bitcoin (CCC:BTC-USD) and fellow limited-supply coins can often see their value rise astronomically. Much like Picassos, vintage wines and 1868-collectible stamps, their limited availability means each minted piece becomes more valuable with each passing day.

DOGE Price to $1? Or $10?

Even without inflationary changes, the price could still hit $1. The cryptocurrency has 130 billion coins outstanding; a $1 price-per-coin will still leave it 55% the size of Ethereum (CCC:ETH-USD), the world’s second-largest crypto. And because only the marginal trade matters in asset pricing, even a few major account owners could theoretically send values soaring.

With some luck, the coin might even stay at $1. With renewed interest in the Shiba-Inu-fronted coin, developers have since jumped back into its code repository, proposing crucial usability and speed improvements. Developers have pushed major changes before – DigiByte and Litecoin (CCC:LTC-USD) snippets features prominently in Dogecoin’s source code. More may be on the way.

Inflation will also become a minor issue over time – the outcome of a flat reward divided by a growing capital base. By 2040, Dogecoin’s inflation rate would have dropped to just 2.4%, or roughly the same as U.S. dollars today. By 2060, it would be 1.6%, making it deflationary relative to dollars.

dogecoin supply and inflation

Source: Author Calculations

However, sending Dogecoin to $10 will require an even more significant change: a switch to a deflationary system sooner than 2060.

Dogecoin’s 10,000 Rule

Currently, miners earn 10,000 DOGE per block, which happens about once per minute. That puts a $10 price target firmly out of reach; no matter how many people buy Dogecoin, its ever-growing supply makes price gains an uphill battle. A $10 price means Dogecoin needs to surpass Bitcoin in market capitalization and stay there.

But in open-source cryptocurrencies, no rule is permanent. With enough core contributors voting for change, even projects as large as Ethereum can alter its fundamental building blocks to keep up with newer coins.

Today, Dogecoin finds itself at the same crossroads. Its codebase is rapidly aging, and newer coins like Cardano (CCC:ADA-USD) and Polkadot (CCC:DOT-USD) are nipping at its heels. Even Bitcoin looks vulnerable to third-generation coins that can perform transactions far faster and cheaper.

So far, Dogecoin’s grassroots-based approach has helped the cryptocurrency avoid obsolescence; people buy the coin for fun and profits, not usability. But unless larger stakeholders also step up, these efforts can only go so far.

The Dogecoin Whale

Ordinarily, prominent crypto stakeholders will help fund code and business development. The Cardano Network, for instance, has three official organizations to manage standardization, technology and developer support. Together, they share around billions in funding. Ripple Labs has a similarly large budget for promoting XRP (CCC:XRP-USD).

Meanwhile, DOGE relies on 200 part-time coders and a legion of online fans for support. Many look like core contributor Ross Nicoll – working for free to maintain an ever-growing system. It’s why much of its code gets lifted from other coins: there are simply not enough resources to develop proprietary code. Others are like the thousands of social media followers on Dogecoin; many constantly hound the developers to cap the currency’s supply.

If investors want to send Dogecoin prices to $10, far more is needed than buying the coin and posting tweets. It needs a benefactor to help fund improvements.

Already, the coin has some big-name backers. On Thursday, Elon Musk promised to literally send the coin to the moon on a SpaceX rocket. He could make an even bigger impact by starting a “Dogecoin Foundation” to fund development and promote adoption among startups and enterprises. So far he’s avoided that, blaming the “Dogecoin Whale“. Regular investors can help by contributing, rather than hounding developers.

Dogecoin to $10 is more than a dream – it’s a possibility that’s just around the corner if the community one day bands together.

On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.

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