Forget Dogecoin: Buy This Tech Stock Instead

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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

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Nashville’s The Bobby Hotel will now accept cryptocurrencies including Dogecoin (DOGE), Nashville Business Journal reported.

What Happened: Guests at the 144-room boutique hotel can now reportedly pay for their reservations in the Shiba Inu-themed cryptocurrency along with Bitcoin (BTC) and Ethereum (ETH) among others.

Bobby Hotel’s area general manager Jeff Crabiel said that the cryptocurrency would be accepted through a partnership with BitPay, an Atlanta-based bitcoin payment service provider.

“As Bitcoin and cryptocurrency become more widely accepted forms of payment globally, it was important to find a way to provide our guests with the access and convenience of utilizing these currencies when visiting Bobby,” said Crabiel, reported the Nashville Business Journal.

DOGE traded 11.19% higher at $0.66 at press time while the apex cryptocurrency by market capitalization, BTC, traded 1.68% lower at $57,927.09.

See Also: Exclusive: Dogecoin Creator Says What Sets Meme Crypto Apart From ‘Thousands Of Failed Coins’ Is Being A Meme

Why It Matters: The hotel will also accept cryptocurrency for event bookings including weddings, meetings, and others, according to the Nashville Business Journal.

Late in March, Lativian airline airBaltic also began allowing flyers to pay for their tickets in DOGE, Cointelegraph reported.

The airline already accepts other cryptocurrencies such as BTC, ETH, Bitcoin Cash (BCH), and USD Coin (USDC).

Last month, Dallas Mavericks owner Mark Cuban said the price of DOGE will “definitely hit” $1 if transactions with the cryptocurrency by fans retain the momentum. Cuban’s comments came after his basketball team began accepting DOGE for tickets and merchandise sales.

Elon Musk-led Tesla Inc (NASDAQ: TSLA) has also begun accepting BTC for payments.

Read Next: Why Buying A Tesla With Bitcoin Isn’t Really A Good Idea — For Now

See more from Benzinga

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

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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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