Dogecoin For Newbie Investors: How Does It Differ From Other Cryptocurrencies?
Dogecoin (DOGE) is one of the many cryptocurrencies on the market. It has a market capitalization of USD$7,756,130,231 and is ranked 10th in that regard. In short, Dogecoin can hold its own against other altcoins (any cryptocurrency that’s not Bitcoin). Be that as it may, it’s important to make a distinction between Dogecoin, a meme coin, and other cryptocurrencies.
A Brief Overview Of Dogecoin
Dogecoin is a meme coin, a type of cryptocurrency that was initially created as homage to a specific meme. For your reference, a meme is a funny or interesting idea in the form of media, like a video, image, or song. Dogecoin, in particular, originated from the doge meme, which is basically an image of a Shibu Inu dog. The coin’s logo uses the same image. Although meme coins carry similarities to “regular” cryptocurrencies, they also differ in several ways.
These differences are particularly important to newbie investors as they may affect the coin’s profitability. With that said, here’s how Dogecoin differs from other cryptocurrencies:
One of the main differences between Dogecoin and other cryptocurrencies is their price. Meme coins, including Dogecoin, generally have a substantially lower price than other cryptos.
If you look at the crypto coin ranking chart, you’ll find that most of the top 20 in the market cap have a price of at least half a dollar, whereas Dogecoin is only worth USD$0.05836. This is most likely one of the reasons Dogecoin became popular in the first place: It’s affordable.
The same applies to other meme coins, like Shiba Inu (SHIB), rank 14 in terms of market cap, with a price of USD$0.00001087. You’ll rarely find a meme coin with a price over a dollar. Its significantly lower price has a lot to do with the circulating supply of Dogecoin.
Circulating supply is yet another factor that affects the profitability of a coin. As the name implies, it refers to the quantity of a specific crypto coin currently circulating in the market.
Another difference between Dogecoin and other cryptocurrencies is that its circulating supply is often in the hundreds of billions. In fact, Dogecoin currently has a circulating supply of 132,670,764,300. For comparison, the supply of Bitcoin at the moment is 19,155,706, and the second highest circulating supply in the top 10 is 67,923,548,347, held by Tether USDT.
Keep in mind that supply and circulating supply are different. Supply refers to how much of a crypto can be created, while circulating supply is the number of coins currently owned.
Though Dogecoin has a finite circulating supply, it has an unlimited supply. That basically means as long as someone is willing to buy the coin, they can always get them, unlike other cryptocurrency coins with a finite supply, no matter the number of willing investors.
Every cryptocurrency has what experts call the hash algorithm. In its simplest terms, a hash algorithm is a method that the blockchain uses to mine or create a specific cryptocurrency.
Bitcoin, for example, uses a hash algorithm called SHA-256, whereas Dogecoin uses the Scrypt algorithm, which is apparently a more convenient transaction process, according to experts. That’s why it takes less time to make Dogecoin, leading to a higher circulating supply.
For comparison, the blockchain takes 10 minutes to create and confirm the creation of one Bitcoin, while Dogecoin only takes 1 minute. That would explain why even if popular, probably even more so than Bitcoin, Dogecoin is still not as expensive. Its considerably high supply leads to a lot lower demand, which in turn results in an extremely low price.
There’s a general consensus in the industry that meme coins are supposedly more volatile than other cryptocurrencies like Bitcoin. Contrary to common belief, that’s often not the case.
Supply and demand, user sentiment, media hype, and other factors that affect a cryptocurrency’s volatility affect the volatility of Dogecoin in a similar manner. The only difference is that media hype is often the biggest contributing factor to a meme coin’s volatility. To be precise, the hype around the meme which birthed Dogecoin, which is the doge meme, affects its value.
In fact, 5 of the top 10 cryptos in terms of market cap have had higher volatility than Dogecoin in the past 7 days from the time of this writing. This is a testament to the fact that Dogecoin is as volatile as any other crypto. Dogecoin simply has more volatile factors.
One of the main factors that affect a cryptocurrency’s value is media hype. Hence, it makes sense why you’d want to base your strategy on which coin is the most popular at the moment. But that’s not always the most viable strategy as some cryptocurrencies behave differently than others. Dogecoin, in particular, is different from other cryptos, as you may have realized in this guide. Therefore, you must craft a different strategy when dealing with these kinds of crypto.