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If you’re considering putting your money into Dogecoin, there are a few things you should ask yourself first.
Not many cryptocurrencies have had a bigger or wilder 2021 than Dogecoin. From the start of the year to the beginning of May, Dogecoin’s price went up by 12,000%. Since then, It has dropped by over 50%. It’s also one of very few cryptocurrencies to become a household name. Even my grandmother has heard about it.
The price swings and the popularity of Dogecoin might have you wanting to get in on the action. But this coin is far from a slam dunk investment, so make sure to answer some important questions before you buy.
1. Why do you think Dogecoin is worth buying?
The success of Dogecoin has attracted a lot of new buyers. Many are interested because they don’t want to miss out if the price keeps going up, or because they’ve heard about this hot new money-making opportunity through word of mouth.
When deciding if you should buy Dogecoin, neither of those are good reasons to say yes. Past results are no guarantee of future results. The price skyrocketed before, but that doesn’t mean it will happen again.
There’s a popular acronym in the crypto community — DYOR, which means “do your own research.” If you want to purchase Dogecoin, think long and hard about why it’s worth buying. It was, after all, created as a joke, and there’s nothing to make it stand out from thousands of other coins. Its popularity has pushed the price up, but popularity alone doesn’t make for a sound long-term investment.
2. Have you considered other cryptocurrencies?
Cryptocurrency is full of exciting coins and projects. If Dogecoin got you interested in crypto, take some time to see what else is out there.
Bitcoin is the biggest cryptocurrency, and with its limited supply, some think it could succeed as a digital store of value. With the Ethereum blockchain and the smart contracts it offers, Ether is also very popular, and there are several reasons to buy Ether over Dogecoin. Those who value cryptocurrencies with a smaller environmental impact may like Cardano, which focuses on both sustainability and economic accessibility.
Those cryptocurrencies, and many more, have their own unique advantages that make them special. Dogecoin doesn’t, which will likely limit its growth potential.
3. What are your plans with your investment?
Cryptocurrency prices can change quickly, and Dogecoin is one of the most volatile. That’s why it’s important to have a plan. Otherwise, you could find yourself wondering whether to sell after every movement in price.
Your investment plan is the conditions when you’ll sell some or all of your Dogecoin. Let’s say you buy Dogecoin at a price of $0.34. You could decide that you’ll sell if the price drops to $0.20 or lower, or if it rises to $0.55 or higher. Another popular option is that if the price doubles, you pull out your initial investment and leave the rest.
You can also use a timeframe for your plan instead of prices. Some buyers commit to holding Dogecoin for three months, a year, or longer. This can be a good way to avoid worrying too much about short-term price fluctuations.
4. How will you buy Dogecoin?
If you’re sure about buying Dogecoin, then you need to know how to buy it. Since Dogecoin used to be much smaller and it’s so controversial, some of the major cryptocurrency exchanges don’t offer it.
A good place to get Dogecoin is the Gemini exchange. It’s one of the biggest exchanges in the United States, it’s secure, and it’s beginner-friendly. If you’re new to crypto and you don’t have an account with any exchange yet, then Gemini is probably the easiest option.
Buying Dogecoin isn’t a decision to take lightly. The hype train may be over, and if you’re expecting big gains, it’s best to temper those expectations. Spend some time going over the questions above to decide whether you’ll buy Dogecoin, what your plans with it will be, and how you’ll make the purchase. And if you decide to buy, only put in what you can afford to lose.
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Lyle Daly owns Bitcoin and Ethereum.
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