Dogecoin was the biggest meme coin of 2021, with its price increasing by almost 216% in January 2021 alone. It didn’t stop here. Dogecoin continued to climb, reaching its all-time high in April as investors, many inspired by Tesla CEO Elon Musk, rushed to acquire the coin.
As Dogecoin has experienced volatility, many investors have asked themselves, “Should I sell my Dogecoin?” So, we’ve compiled this list to help you decide.
1. You have made a good profit
A good profit will mean different things to different people. A good yardstick for deciding when to sell Dogecoin is whether you have doubled, tripled or quadrupled your initial investment. Given the volatility of Dogecoin, cashing out around 50% of your holdings may make sense if you’ve already made a sizeable profit.
By cashing out, you’ll have enough money to cover capital gains taxes as well as a significant return on your initial investment. Beyond that, the rest of your Dogecoin assets are net profit. Therefore, even if Dogecoin loses value, you will not lose any of the initial cash you invested.
Once the market settles down, you can always consider moving the funds back to Dogecoin. However, keep in mind that due to the volatility of the crypto market it is difficult to predict how any coin will perform in the future, and your investment in Dogecoin or any crypto can always be lost.
2. Dogecoin is a speculative asset
Speculation is not unique to Dogecoin. All cryptocurrencies are highly speculative and volatile investments. The novelty of Dogecoin led to its viral popularity, but the real-world utility of the coin has not been tested.
People buy Dogecoin without considering its fundamentals in the hope that they can sell it to another investor at a higher price. Unfortunately, these speculative moves make it difficult for the coin to serve as a reliable store of value.
In contrast, bitcoin has gained social trust over the years and gained first mover’s advantage. Unlike Ethereum and Cardano, Dogecoin is not programmable, so users cannot build decentralized applications on its blockchain.
3. Dogecoin lacks real-world utility
While Dogecoin has generated decent profits for some of its early investors, there aren’t many real-world uses for the coin. The founders of Dogecoin created it as a payment network. However, the token has not been widely adopted for this use.
According to online business directory Cryptwerk, only a few thousand merchants accept Dogecoin. US alone Considering the millions of small businesses in the U.S., that’s a relatively small number.
4. The supply of Dogecoin is unlimited
With a limited supply of only 21 million coins, scarcity is what makes bitcoin unique. Similarly, many alt-coins have followed in the footsteps of bitcoin by establishing a strict limit on how many coins can be produced.
Dogecoin, on the other hand, has an unlimited supply, which makes it inflationary and ineffective as a long-term store of value. Basically, the more Dogecoins there are in circulation, the less the coin is worth.
Why stick with Dogecoin?
We mentioned earlier that Dogecoin is inflationary and has limited real-world use, but the story doesn’t end there. Although Dogecoin has seen limited adoption as a form of payment over the past year, this could be changing.
Around 2140, I won’t have any more bitcoins left. In contrast, the supply of Dogecoin was designed to increase at a fixed absolute rate, which guarantees a steady increase in supply over the long term. Once mined the supply of Dogecoin increases at a rate of approximately 5 billion per year.
While the number of Dogecoins can increase infinitely, it will potentially reach a practical limit. Since the growth of the coin is predictable, it is easy to use as a currency to buy goods and services. Therefore, the potential for wider acceptance in the future may make Dogecoin worth holding.
He is not everything. Dogecoin is expected to migrate from Proof of Work (PoW) to Proof of Stake (PoS) to reduce its energy consumption and increase transaction speed. Until now, Dogecoin, like bitcoin, has relied on PoW to validate transactions.
The change to PoS will be positive for owners of Dogecoin as PoS will allow anyone holding the coin to validate transactions. Also, when a new block is added to the blockchain, they will receive a certain percentage of the pledged assets as compensation. So, if you own Dogecoin, it might be a good idea to take a look to see if the proposed changes to PoS become a reality.
Another thing to keep in mind before selling Dogecoin or any other crypto is the potential tax implications. If you hold Dogecoin, your position amounts to an unrealized gain or loss. Once you sell the coin, you may face a hefty tax bill.