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Risk Management in Dogecoin Investment- Protecting Your Investment Capital

If you follow cryptocurrency, you have probably heard of the “Elon Musk” coin: Doge. The meme coin sits among the top 10 cryptocurrencies according to market cap. It has experienced massive gains over the past year, which has led to many investors asking, “Is it a great investment?” 

Being a meme coin, Dogecoin is subject to high volatility. While this means possible triple-digit profits, investors can also lose a chunk of their portfolio. Hence, practising risk management is crucial. This article explores critical strategies to maximise profit and cut losses. 

Understanding Dogecoin: The Fundamentals   

Before investing in Dogecoin, it is crucial to understand its fundamentals. In 2013, Dogecoin started as a token to mock the growing interest in cryptocurrency. The project’s founders are Jackson Palmer and Billy Markus. Dogecoin is based on Litecoin, and its consensus mechanism is Proof-of-Work (PoW). 

An unlimited amount of Dogecoin is available, and the token is inflationary by design. The coin’s major use is processing payments since it is easy to solve its mathematical equations and record transactions. It takes less time (about a minute) to ratify new blocks on the token’s blockchain than most payment tokens. However, because of its hyperinflationary design, it is not the best token to store value. 

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, the token 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. 

The token’s limited adoption and acceptance also contribute to its risk. Dogecoin is a meme coin with no blockchain utility, so its primary use case is as a payment option or to store value. So, Dogecoin has a long way to go before becoming a staple payment token, making investing challenging.

While the crypto space’s lack of government regulation is a huge attraction, it also leads to more 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 

A growth chart for growing Dogecoin

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: 

  • Dollar-Cost Averaging (DCA): This technique is effective at combating the volatile crypto market, and how it works is pretty simple. The basics of DCA 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.  
  • HODL: This strategy is based on the fact that Dogecoin would presumably 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 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 wallet to hold your coin. 
  • 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, you will have to focus intently on the market and get ready 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.

To reap the benefits of this strategy, you need to use a fast and secure platform that allows you to maximise profit. Fortunately, there is Breet, an over-the-counter platform that is secure and facilitates seamless transactions. Choose us to sell your Dogecoin for cash at the most profitable rate in the market. 

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, 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. 

Conclusion

Dogecoin is an altcoin that has captured the interest of millions of investors. Its rise from being a satire to one of the most actively traded cryptocurrencies has led many to consider it a probable investment choice. But should you? While Dogecoin might be an excellent addition to your portfolio, it also has risks. You must consider risk management strategies to exercise caution and maximise your investment!

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