This article applies to most dog, cat, and other meme coins.
Many enthusiasts say, “Imagine if Dogecoin reached $10 or $100.” But do we really understand the concept of market cap and circulating supply?
If you are buying Dogecoin because:
- You are looking for a short-term profit (which is a risky bet),
- You do it for fun, so there is no problem, as long as you understand the risks and volatility of this asset.
But if you're doing this with a long-term profit in mind, let's review some basics.
Dogecoin Price Analysis, Market Cap and Circulating Supply
When Dogecoin was at $0.7 (a few months ago), I calculated the following to illustrate how its price works in relation to market cap and circulating supply.
- While many factors influence the price of cryptocurrencies, this is a general way to estimate where the price might go.
- When the numerator (market capitalization) goes up, the price goes up. Market CAP.
- When the denominator (circulating supply) rises, the price falls.
For Dogecoin's market cap to increase significantly, a large influx of buyers would be needed. However, many view Dogecoin as a "meme" or a short-term investment without solid long-term adoption, unlike other cryptocurrency projects.
To reduce the circulating supply, Dogecoin would have to stop mining. But currently, 14.4 million Dogecoins are generated per day, which equates to 5 billion coins per year.
What would it take for Dogecoin to hit $10?
For Dogecoin to reach $10 at the current supply, the market cap would have to reach $1.29 trillion, meaning Dogecoin would have to stop all production and never generate new coins.
Is a $1.29 trillion market cap possible? To put that into perspective, Dogecoin would have to surpass giants like Facebook and Tesla.
Conclusion
Dogecoin is an uncapped supply project, meaning that its production will never stop. Investing in Dogecoin for the long term is like trying to dry a wet floor when there is a constant water leak. You can add more people to the task, but eventually, it will be impossible to stop the flow.
So maybe it's time to put away the mop and look for other strategies.