Dogecoin Has Soared by 324% In 2024. Is It a Better Buy than Bitcoin?

Dogecoin (CRYPTO: DOGE) is a novelty cryptocurrency that uses a Shiba Inu dog as its mascot. It entered 2021 trading at a price of $0.0046 per token, and within five months, it had surged by 15,769% to a high of $0.73 amid the frenzy across the crypto industry. Tesla CEO Elon Musk was a big supporter of Dogecoin back then, and his influence partly fueled the rally.

But the meme token plunged 92% from that peak as the cryptocurrency industry fell into a bear market in 2022. Investor sentiment has improved significantly since then, with leading cryptocurrencies like Bitcoin (CRYPTO: BTC) soaring to new heights this year.

However, Dogecoin continued to struggle, and it was trading near its 52-week low as recently as September. That was until Donald Trump won the presidential election on Nov. 5, with Musk's help.

Dogecoin is now sitting on a 324% gain for this year, trouncing the 107% return generated by Bitcoin. Going forward, which one is the better buy?

The Musk influence

Throughout 2021, Musk often shared Dogecoin-related memes on social media -- particularly on X (formerly Twitter), which he now owns. He even called it his favorite cryptocurrency, which investors took as a crystal-clear endorsement.

Musk's influence over Dogecoin's price movements hit a fever pitch when he appeared on Saturday Night Live on May 8, 2021, as investors speculated he would make an even bigger, more public proclamation of his support. As it turns out, he merely participated in a comedy skit -- nothing of substance came from the event. Dogecoin immediately plunged, and it still hasn't reclaimed the all-time high it hit that weekend.

To Musk's credit, he tried to add some utility to Dogecoin to help support its value. At the end of 2021, he announced that Tesla would accept the token as payment for certain items of merchandise. That didn't move the needle in terms of adoption, and its price continued to trend lower.

But Dogecoin appears to be back. Musk was a big financial backer of President-elect Trump's reelection campaign, and one of Trump's first post-election announcements was his intent to form a new entity called the "Department of Government Efficiency" -- D.O.G.E for short -- which appeared to be a reference to Musk's favorite cryptocurrency.

Musk will serve as the head of D.O.G.E alongside Vivek Ramaswamy. Shockingly, but not surprisingly, Dogecoin has more than doubled since Nov. 5, though there's no indication that the new initiative -- which will not be an official government department -- will have any tangible connection to the token.

Image source: Getty Images.

Bitcoin has real tailwinds

Many enthusiasts predict cryptocurrencies could eventually become a replacement for traditional money. Bitcoin, for example, is decentralized, so it can't be manipulated by any one person or government, and it's built on a reliable system of record called the blockchain. However, consumers and businesses haven't adopted Bitcoin in large enough numbers to give it real utility as a currency.

In fact, just 8,952 merchants accept Bitcoin as payment worldwide, according to Cryptwerk. That's far better than Dogecoin, which a mere 2,521 businesses are willing to accept, but if consumers can't spend their crypto on everyday goods and services, they don't have much reason to hold onto it. Without widespread adoption, it's very difficult for a currency to maintain value.

There is a growing consensus that Bitcoin might serve better as a store of value rather than a currency, making it similar to gold. The U.S. Securities and Exchange Commission approved a number of Bitcoin exchange-traded funds (ETFs) this year, providing investors with a simple, regulated way to park money in the cryptocurrency.

A single Bitcoin currently trades for around $92,000, but Cathie Wood's Ark Investment Management thinks that the price could soar as high as $1.48 million by 2030, based on eight potential use cases that could drive adoption.

Bitcoin becoming an accepted analogue of digital gold is one of those use cases, and Ark believes it will become a part of the asset base for institutional investors, which is a real possibility now that spot Bitcoin ETFs are widely available. Ark predicts companies -- and even governments -- could choose to hold Bitcoin in their reserves alongside traditional cash, a potential hedge against negative economic events like inflation.

Interestingly, Trump has said he's open to the idea of creating a Bitcoin reserve for the U.S. government, which means the world's wealthiest nation could become an active buyer of the cryptocurrency.

Dogecoin investors should learn from what happened after 2021

Even though Dogecoin is sitting on triple the percentage gain of Bitcoin this year, it still hasn't touched its old peak. Meanwhile, Bitcoin continues to set new highs, and it has a clear case for further upside.

Dogecoin has little utility, and it doesn't have the support of institutional investors or regulators. Therefore, it's merely a vehicle for speculation. Investors should learn from what happened the last time a speculative frenzy sent the token surging -- it suffered a 92% decline over the following year because there were no fundamentals behind its momentum.

As a result, Bitcoin is the better long-term buy. Even if it doesn't reach a price of $1.48 million over the next six years like Ark Invest predicts, it has a solid track record of delivering positive returns since it was launched in 2009, and it should comfortably outperform speculative meme tokens like Dogecoin over the long run.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.