How to Protect Your Capital in Dogecoin Investment

Imagine you are at a party that promises a grand prize if you participate in a game. The excitement is out of this world. The crowd is wild around you, and the hype is almost palpable. As you walk to the stage to give it a shot, you realise that the game is unpredictable and your chances of winning almost match those of losing. You would probably take a step back to weigh your chances. Investing in Dogecoin is a similar experience. 

Dogecoin is a meme coin subject to high volatility. While this means potential triple-digit profits, investors can also lose a chunk of their portfolio. Hence, practising risk management is crucial to ensure you preserve your investment. This article explores practical ways to maximise profit and cut losses. Let’s begin! 

Understanding Dogecoin: The Fundamentals   

Before investing in Dogecoin, it is crucial to understand its fundamentals. In 2013, the project’s founders, Jackson Palmer and Billy Markus, started Dogecoin as a token to mock the growing interest in cryptocurrency. But what started as a parody gained much traction among crypto investors.

Dogecoin uses a Proof-of-work consensus mechanism based on Litecoin and Bitcoin. However, the difference between DOGE and the big names is how easy it is to make a block. This insane efficiency offers benefits like faster transactions, making DOGE ideal for transactions. 

Also, the coin is inflationary by design, which means the total number of DOGE increases with time—about 10,000 DOGE are mined every minute. Undoubtedly, the inflationary design has its benefits, but it also has its downsides. Because of its hyperinflationary design, it is not the best token to store value. 

Regardless, the coin has gone from a meme coin to having one of the highest market caps. There is so much potential for investment in the crypto token. Hence, it is crucial to know the risks and how to manage them.

What Are the Risks of Investing In Dogecoin? 

Despite Dogecoin’s price surge in the past year, it remains a risky investment like every other cryptocurrency.

1. Dogecoin is not immune to the market’s volatility. Hence, it occasionally experiences massive pumps and dumps that can lead to a loss in your investment.
2. Dogecoin is a meme coin with no blockchain utility, so its primary use case is as a payment option or to store value. The token’s limited adoption and acceptance also contribute to its risk.
3. While the crypto space’s lack of government regulation is a huge attraction, it also leads to fraud and market manipulation. This is crucial as the meme coin’s value depends significantly on market sentiments from rumours, news, and even certain tweets. Several stats show how social media trends fuel Doge’s price trend. 

How to Protect Your Dogecoin Investment: Risk Management

We now know that Dogecoin is a risky but potentially profitable crypto investment. So, how do you mitigate the risks of investing in Dogecoin and keep a huge chunk of the profits? Here are several steps you can take to reduce losses and possibly end with a profitable trade: 

1. Dollar-Cost Averaging (DCA): 

This technique is effective at combating the volatile crypto market, and how it works is pretty simple. The basics of Dollar Cost Averaging are dividing your initial capital into chunks, which you invest in Dogecoin over a set period. You can choose to make it weekly, bi-weekly, or monthly. This way, you can buy the coin at various price points and spread the risk across a period while remaining consistent with your investment capital.  

2. HODL: 

This strategy is based on the fact that Dogecoin would increase over time. When you HODL, you are unfazed by short-term swings in the market. This way, you buy now and reap dividends in the years. Records have shown Dogecoin has increased consistently over a long span. However, you are advised to do DYOR before opting for this strategy. To get started, you need a Dogecoin wallet to hold your coin. 

3. Leverage Short-term Price Movements: 

Dogecoin’s short-term price moves are sporadic. While the long term has its perks, so does the short term. However, it requires intense focus on the market to know when to hop in and out to ensure you profit from every slight increase to accumulate your profits. These little leaps come together to form massive profits in the end.

Frequently Asked Questions (FAQs) About Risk Management in Dogecoin Investment

Are there risks to investing in Dogecoin? 

Yes! There are several risks associated with investing in Dogecoin. First, there is market volatility. While the volatility can serve as a means to harvest massive amounts of profit, you can also accrue losses. 

Another risk of investing in Dogecoin is its lack of widespread acceptance. Unlike Bitcoin, not many crypto investors accept Dogecoin as a payment token. Finally, the lack of government regulations increases the chances of market manipulation and fraud. 

What’s the current Dogecoin price?

Like every cryptocurrency, Dogecoin’s price varies with time. We recommend you check our rate calculator to stay updated on the cryptocurrency’s price.

Who created Dogecoin, and when?

Jackson Palmer and Billy Markus created Dogecoin, the payment token, in 2013 as a satirical response to the growing interest in cryptocurrency. Both software developers designed this token after a popular Shiba Inu meme. 

Can Dogecoin ever reach $1? 

It is hard to say. However, for the Dogecoin price to hit the $1 market, its demand has to overwhelm its current supply, which is a tall task. However, nothing is truly certain in the crypto space. 

What type of cryptocurrency is Dogecoin? 

Dogecoin is an open-source, peer-to-peer cryptocurrency. It is also considered a meme coin based on the circumstances surrounding its origin. Regardless, it is an altcoin that’s traded actively, has a large user base, and is growing in acceptance.