Anyone even halfway interested in investing in Dogecoin (CCC:DOGE-USD) has to have an open mind toward risk. To say that investing in Doge cryptos is like riding a roller coaster is probably not adequate. To say the least, you have to have a strong stomach for the ups and downs.
The easiest way to do this is to only put a small amount of your overall portfolio in Dogecoin. You have to have the mindset that at some point you will average cost down at a lower price to lower your average cost in the cryptocurrency.
That is what would have happened over the past several months. For example, as of July 26, Dogecoin was just above 20.48 cents per DOGE. It peaked around May 6 at 73.76 cents. This means it was down 72.2% from its peak. That is just in the space of 2.5 months. What a ride.
What Could Make Dogecoin Rise
But now, there is reason to believe that things could turn around. The main point is that Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) are both getting close to their trough points for various reasons. They seem due for a recovery sometime by early fall. It could even start in August.
The implication is that Dogecoin will tend to move in tandem, and in fact, somewhat leveraged to the movements in these two cryptos. After all, Dogecoin is now the eighth largest cryptocurrency, just after Ripple (CCC:XRP-USD) and USD Coin (CCC:USDC-USD), according to Coinmarketcap.com. In fact, Dogecoin now has a market capitalization of $26.73 billion. That is a very substantial market value.
Back to Bitcoin. One reason I think it could be at a trough is that stories are appearing about companies that will use it as a form of exchange.
For example, Amazon (NASDAQ:AMZN), according to Barron’s magazine, posted a job site for a digital currency expert. His role will be to “own the vision and strategy for Amazon’s Digital Currency and Blockchain strategy.” If Amazon embraces digital currency, watch out world. Bitcoin and every other crypto will take off. In addition, every other major online retailer will look to copy it. That could spark a huge demand for Bitcoin, Ethereum and Dogecoin.
Another upcoming catalyst is the London Hard Fork for Ethereum scheduled to take place on Aug. 4. This is a major change to Etherum’s blockchain code that will add five Ethereum Improvement Proposals (EIPs) that aim to enhance the blockchain. I wrote about one of these EIPs recently, EIP 1559. These forks are meant to help Ethereum move to a proof-of-stake system from its existing proof-of-work validation system for blockchain transactions.
The point is that Ethereum is likely to slowly move up as a result of these proposals, as they will tend to decrease its supply. The implication is that Dogecoin will benefit as well, given how closely it is tied to both Bitcoin and Ethereum.
What to Do With DOGE Tokens
To be fair, I should also mention that Jackson Palmer, a co-creator of Dogecoin and who left the project in 2015, made a number of recent comments on cryptos. His posts on Twitter (NYSE:TWTR) were super critical of cryptos, including Dogecoin, by definition. But who cares about this guy, and what he thinks anyway?
Anybody who saw how far Dogecoin rose earlier this and how quickly it dropped must know how speculative the crypto really is. It is important to take this volatility into account if you are going to put any money into Dogecoin.
On the date of publication, Mark R. Hake held a long position in Bitcoin (BTC-USD) and Ethereum (ETH-USD). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.