In this newsletter, we are profiling Dogecoin. In previous newsletters, we have profiled Bitcoin, Ethereum, Litecoin, Chainlink and many others. Access all our newsletters in our archives at madcapx.substack.com.
The Short of It
Interestingly worth over 1 billion in market cap, a favourite for many to buy in the lows and then wait for that pop to make insane gains of 500% was made to be a fun crypto coin.
This portfolio section gives you an idea of what sort of return you can get when investing in cryptocurrencies. Over time, we will introduce other portfolios with different crypto assets.
The BTC Hold is up 191% since October 1st, 2020. Since this is a long term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long term hold position as our best stable alternative.
The BTC/USD fund is up 131% since November 2nd. This past week bitcoin has been ranging between $31,037 and $37,850 USD in value. Bitcoin is seeing a correction this week. Will the correction stay within 20-33% of highs. That would be as low as $28k if it corrects 33%.
FUND 3 started on November 16, 2020, with $1000 USD in value and invested into BTC, LTC, ETH and ADA. The total amount of BTC value from the four coins has a gain of 18% since the start. Against USD, it is up 125% since the start. We will hold these positions to see how well it does against our BTC-only portfolios. LTC has a loss of 1.8% against BTC. ETH is up 37% against BTC since the start. ADA is up 70% since the start against BTC.
From the years 2013 to 2016, there was a massive influx of new cryptocurrency coins being created, mostly based on cloning Bitcoin or Litecoin and slightly tweaking the parameters. Luckycoin was one such clone, and Dogecoin was cloned from a fork of the source code for that (which in turn was a fork of the Litecoin source code) in December of 2013. It was the concept of Jackson Palmer (an Australian software developer) to create a sarcastic and parody coin with Billy Markus (an American software developer) coming in to do the coding. The coin has a Shuba Uni Japanese hunting dog as its mascot and has been used in many memes since. If you have been in the cryptocurrency ecosystem for a longer time, you have most likely heard terms such as “Very currency” or “Much wow” passed about, both of which originated with Dogecoin.
Dogecoin is an inflationary coin (approximately 4% in 2021) with 1-minute block times and now has a constant 10,000 DOGE per block reward. They still maintain the original Litecoin Proof-of-Work consensus algorithm called Scrypt but have modified it to be Auxillary Proof-of-Work (AuxPoW), a form of merged mining where everyone mining Litecoin can use the same hashing power to find blocks for Dogecoin as well. There are many Litecoin clones that have implemented AuxPoW to prevent mining attacks and keep their blockchain moving at a fast and predictable rate.
Dogecoin does benefit from having a loyal community of supporters and users who trade it and use it for such things as tipping for social media content. Elon Musk has a habit of tweeting about Dogecoin causing big bumps in value afterward. Even Vitalik Buterin, of Ethereum fame, is a great fan and is rumoured to have donated thousands of ETH in 2018 in order to help fund development. Sixty percent of all DOGE in existence belongs to only a handful of wallet addresses, most likely belonging to original whales. It is speculated that these whales are probably the cause of most of Dogecoins major pumps and dumps.
If you want to get invested in this fun coin, just make sure you understand that its price is heavily manipulated, and it could dump at any time. However, it has had consistent pump and dump patterns over the years, and if you are one to expect that trend to continue, Dogecoin may be an excellent investment for you.
DOGE has been a cyclical asset since 2014. Up till 2019, the longest it had been flat was late 2017 for 2 months. From 2019 to 2020, DOGE experienced a 10 month period of relative flatness compared to its history prior. There could be a few factors that could be causing it to stagnate. The first is that 5 billion coins are mined every year, and the community is not growing like it used to. 5 billion coins at 25 sats are worth 1250 BTC, which in terms of bitcoin is not very much since there is 900 being produced every day in 2021. But the huge difference is that bitcoin is being bought up quicker than it is being mined by just a few companies like Grayscale, Paypal and Square, to name a few. DOGE, on the other hand, is not being bought by funds like Grayscale or any fund that I could find. Second, DOGE was a popular coin on many exchanges in the past to be paired against if a cryptocurrency was trading lower than 1 Satoshi. Now stablecoins are the ones being used mainly outside of BTC or ETH as a base pairing. Third, who, besides Elon Musk, even brings up DOGE anymore?
So yes, DOGE has been cyclical over the past 5 years but are we seeing the end of its massive volatile moves and instead, the new norm will be 100% gains and a quick pullback. The bottom-up to now has been 15-16 satoshi. DOGE did visit there in late 2020 for almost 2 months.
Compare the above chart that is paired against BTC to this one below to USD. This chart looks fantastic if you are the type that trades against a DOGE/USD pairing. DOGE had its second-highest peak at 0.0139 USD. Though when trading against BTC, it was a dull and not so exciting of a peak. It hit 40 sats, which before June 2019, was not considered anything. Sure it would have given a good return for DOGE buyers below 20 Satoshis and out in the mid to high 30s to increase the amount of BTC you owned, but it wasn’t that home run of old.
Here is a chart by a Tradingview user that figures that the regular DOGE/BTC cycle is not over, and we could go to 83 as a highly possible target, 109 as a mid target and 217 as a new record target. The only way I can see such optimism play out would be if BTC heads back under 10k USD for longer periods. It is more likely that BTC will stay above $25k, and DOGE will see new lows in between 10 to 14 sats.
Elon Musk seems to have fun with DOGE. Just look at the two tweets he posted this last holiday period. The dates were December 20th and 25th. Then look at the DOGE/USD chart and see the second-highest peak that occurred during the holidays.
The boxers for Christmas have Model S, Model 3, Model X and Y, the 4 Tesla car models and the DOGE meme used by DogeCoin. All “fun” stuff from Elon and great for those who trade on tweets made by him. Altcoins, in general, have thin liquidity and can be pumped by large influencers with only a few words.
Bitcoin accumulation in addresses that have received BTC but has never spent it has risen 17% in just one year. This continues to show a bullish case for Bitcoin. These addresses hold almost 15% of the total Bitcoin supply. This is creating more scarcity for Bitcoin.
The floor presently sits at $29k. While I don’t necessarily expect price will wick downwards that low, traders should prepare for this as worse case scenario. This model tells us we are trading in a regime where a pull-back would be contained within a range of 20%-33% from highs (using daily candle closes).
Graphs and quote by Glassnode and charts.woobull.com
MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites. This weekly newsletter is a paid subscription and supports the team and the Madbyte projects. Subscribe for free and get a limited-time complimentary paid subscription and access to all our archives. The regular cost is $5/month or $50/year. Cancel anytime.
Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.