Dogecoin’s value has been riding an upward trend lately, thanks to new ETF applications. Despite this surge, certain indicators highlight some challenges for the popular meme coin, such as its inflationary mechanism, large holdings by a small number of investors, and the diminishing effect of celebrity endorsements. All these factors suggest that the meme coin might face difficulty maintaining its growth once the initial enthusiasm starts to wane.
A brief look into the market dynamics reveals that Dogecoin’s price can experience short-term spikes due to increased liquidity. However, due to structural reasons, keeping the coin for long-term investment purposes might be a tough call. Investment in ETFs requires acquiring the underlying assets or leverage from swaps, causing a rise in spot prices.
However, a key observation is that such inflows are mostly early-stage and have the potential to decrease over time; thus, the launch of an ETF alone can’t bring about a permanent alteration in a token’s financial anatomy. An important challenge for Dogecoin is that its protocol isn’t structured to have a definitive maximum supply.
Dogecoin operates on a fixed annual issuance system – approximately 5 billion DOGE tokens per annum – that makes it perpetually inflationary. Consequently, this dynamic limits the coin’s scarcity, in turn mitigating long-term growth opportunities when compared to other cryptocurrencies that have capped supplies.
Currently, the total supply of Dogecoin roughly stands at a massive 150 billion DOGE. There have been observations of significant dumping by large account holders, colloquially known as ‘whales’, in correlation with recent price hikes.
It has been reported that large transactions have been executed simultaneously with relatively silent price action, leading to the assumption that the sale-side pressure has been absorbing the buy-side activity driven by the ETFs. A heavy accumulation of Dogecoin in the hands of few holders makes it susceptible to rapid supply shocks when these large investors decide to book profits.
High-profile comments from personalities such as Elon Musk have traditionally triggered sudden price movements in Dogecoin. However, the magnate has recently conveyed his intention to reduce his public involvement in Dogecoin-related affairs and to limit the time he commits to such activities.
This decrease in high-profile endorsements sets a new benchmark for rejuvenating the meme-led hype and constricts a previously reliable information source for avid retail investors. While the introduction of an ETF can lead to a surge of initial investments, it doesn’t necessarily assure a persistent shift in liquidity or market unpredictability.
Notably, mainstream acceptance matters, but for lesser-known tokens, ETF investments often start with retail traders and trend-following investors. It’s important to realize that the steady allocation of institutional funds is a distinct process that usually takes more time to fully kick in.
In summary, while Dogecoin’s recent growth may offer some short-term benefits, there are structural and market dynamics that could potentially challenge its long-term prospects. This includes its continuous inflationary supply mechanism, the influence of large holders, and the dwindling impact of celebrity involvement.
While opportunistic investors may still see benefits in short-term trades, those seeking long-term investments may need to consider the structural limitations and market influences before making investment decisions.
The influence of outstanding personalities and major holders and the coin’s inherent inflationary attributes are indicative of an unpredictable future for Dogecoin. It remains to be seen whether these factors will impede Dogecoin’s long-term viability as an investment, or whether the coin will overcome these obstacles and continue on its upward trajectory.
As Dogecoin moves forward, potential investors should keep these factors in mind. The coin’s ability to withstand these challenges or adapt to them effectively will be a major determinant of its long-term performance and viability in an increasingly competitive cryptocurrency market.
While the immediate future of Dogecoin may seem promising, careful analysis needs to be made regarding these obstacles as potential investors should keep in mind. Dogecoin’s endurance through these challenges and its ability to adapt will be a decisive factor for its long-term success in the ever-evolving cryptocurrency landscape.
The post Dogecoin’s Uphill Battle in the Midst of ETF Applications appeared first on Real News Now.
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