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 Guardian

Lt Johnny Mercil tells court use of force has to be reasonableDerek Chauvin trial – live coverage Mercil said officers are trained to use force in proportion ‘to level of resistance that you’re getting’. Photograph: Jane Rosenberg/Reuters A Minneapolis police trainer who instructed Derek Chauvin in the use of force told the former officer’s murder trial on Tuesday that placing a knee on a suspect’s neck when they are already subdued “is not authorised”. Lt Johnny Mercil told the court that at the time George Floyd was arrested last May, police department policy still permitted the use of neck restraints using an arm or side of a leg when a suspect was being “assaultive”. But he said the training did not include the use of a knee, as Chauvin used for more than nine minutes on the 46-year-old African American man in his custody. Mercil said putting a knee to the neck is “not unauthorised” in making an arrest, but that it is not permitted if the suspect is in handcuffs or otherwise subdued. Floyd was in handcuffs for several minutes before he was forced into the prone position on the ground and Chauvin applied his knee. Chauvin, 45, has denied charges of second- and third-degree murder, and manslaughter, over Floyd’s death, which prompted mass protests for racial justice across the US and other parts of the world. He faces up to 40 years in prison if convicted of the most serious charge. Three other officers face charges of aiding and abetting murder and manslaughter. Mercil, a martial arts expert specialising in Brazilian jiu-jitsu, said he trained officers that the use of force has to be reasonable when it starts and when it stops. The prosecution is seeking to show that even if Chauvin felt that he was using a legitimate level of force when he got Floyd on the ground, keeping his knee on the detained man’s neck for more than nine minutes was not reasonable. There came a point at which it should have been lifted. Mercil said officers are trained to use force in proportion “to level of resistance that you’re getting”. He agreed that it should be reduced as the threat from a suspect diminishes. The prosecutor showed Mercil a picture of Chauvin restraining Floyd as he lay prone and asked if that level of force would be authorised “if the subject was under control and handcuffed”. The police lieutenant replied: “I would say no.” The defence attempted to get Mercil to agree that a training manual showed an officer placing his knee on the back of a neck during handcuffing. But Mercil said the picture showed the knee was on the shoulder and it was the shin across the neck. The distinction is crucial because it means the pressure point is away from where it is most dangerous. Mercil was the latest in a succession of Chauvin’s former colleagues to give evidence for the prosecution. Earlier on Tuesday, Sgt Ker Yang, a 24-year Minneapolis police veteran who now heads training in crisis intervention, said Chauvin was instructed to recognise whether a detained individual is in crisis and needs medical assistance. He agreed that intoxication from drugs or alcohol “can be a crisis”. Floyd’s girlfriend has testified that he was addicted to opioids and another witness said he appeared to be high shortly before his arrest. Nicole Mackenzie, the police department’s medical support coordinator, testified that Chauvin was trained in dealing with drug overdoses and in giving CPR. She said officers are obliged to render immediate first aid in a critical situation and not to simply wait for an ambulance to arrive. Mackenzie said officers are instructed in how to recognise and respond to a person who is unresponsive including taking a pulse and measures to get them breathing again. Video of Floyd’s arrest shows one of the police officers dismissing his pleas that he can’t breathe on the grounds that it takes a lot of oxygen to talk. “Just because they’re speaking does not mean they are breathing adequately,” said Mackenzie. One of the challenges for the prosecution is to persuade the jury that Chauvin, and not the Minneapolis police department, bears responsibility for the methods he used. On Monday the city’s police chief, Medaria Arradondo, attempted to paint Chauvin as a rogue officer going far beyond his training and regulations in his use of force. “To continue to apply that level of force to a person proned-out, handcuffed behind their back, that in no way, shape or form is anything that is by policy,” Arradondo told the trial. The defence suggested Chauvin was merely following his training by the Minneapolis police. Nelson put it to Arradondo that his department’s policies did permit neck restraints under certain circumstances at the time of Floyd’s death. These included the “unconscious neck restraint” used to cut off the blood flow to the brain. However, that hold was only supposed to be used on people “exhibiting active aggression” or sustained resistance to arrest. Arradondo said there had been such a policy but there was no justification for the continued pressure on Floyd’s neck after he stopped resisting. The day began with an attempt by Morries Hall, the passenger in the vehicle with Floyd at the time of his detention, to invoke his fifth amendment right against self-incrimination and not give evidence. Previous witnesses testified that Hall supplied drugs to Floyd. The prosecution opposed the application for Hall to be granted a blanket right not to testify on the grounds that there are relevant questions that do not risk self-incrimination. The judge asked for a list of questions that might be asked. Three other officers involved in Floyd’s death are scheduled to be tried together later this year on charges of aiding and abetting murder and manslaughter. The trial continues.

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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