4 Reasons You Should Sell Dogecoin and Why You Might Keep It (2024)

Dogecoin was 2021's biggest meme coin, with its price soaring by around 216% in January 2021 alone. It didn't stop there. Dogecoin continued to climb, reaching its all-time high in April, as investors, many inspired by Tesla CEO Elon Musk, rushed to acquire the coin.

As Dogecoin has experienced ups and downs, many investors have asked themselves, "Should I sell my Dogecoin?" So, we've compiled this list to help you make your decision.

1. You've Made a Decent Profit

A decent profit will mean different things to different people. A good benchmark for deciding when to sell Dogecoin is if you've doubled, tripled, or quadrupled your initial investment. Given Dogecoin's volatility, if you've already made a sizable profit, cashing out around 50% of your holdings could make sense.

By cashing out, you'll have enough money to cover capital gain taxes plus a significant return on your initial investment. Moreover, your remaining Dogecoin assets are pure profit. So, even if Dogecoin loses value, you won't lose any of the initial cash you invested.

Once the market settles, you can always consider moving funds back into Dogecoin. However, keep in mind that it's hard to predict how a coin will perform in the future due to the crypto market's volatility, and there is always a chance your investment in Dogecoin or any crypto could disappear.

Related: How Elon Musk Caused the Price of Dogecoin to Spike

2. Dogecoin Is a Speculative Asset

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Speculation isn't unique to Dogecoin. All cryptocurrencies are highly speculative and volatile investments. Dogecoin's novelty led to its viral popularity, but the coin's real-world usefulness is untested.

People tend to buy Dogecoin without considering its fundamentals in the hopes they can sell it to another investor at a higher price. Unfortunately, these speculative moves make it difficult for the coin to work as a reliable store of value.

In contrast, Bitcoin has gained social trust over the years and enjoys a first-mover's advantage. Unlike Ethereum and Cardano, Dogecoin isn't programmable, so users can't build decentralized applications on its blockchain.

3. Dogecoin Lacks Real-World Utility

While Dogecoin has resulted in handsome profits for some of its earliest investors, there aren't many real-world uses for the coin. The founders of Dogecoin created it as a payment network. However, the token hasn't been widely adopted for this use.

Only a couple of thousand merchants accept Dogecoin, according to the online business directory Cryptwerk. Considering the millions of small businesses in the U.S. alone, that's a relatively small number.

4. Dogecoin's Supply is Unlimited

With a finite supply of only 21 million coins, scarcity makes Bitcoin unique. Similarly, many alt-coins have followed Bitcoin's footsteps by establishing a hard cap on how many coins can be produced.

On the other hand, Dogecoin has an infinite supply, making it inflationary and ineffective as a long-term store of value. Basically, the more Dogecoins in circulation, the less the coin is worth.

Why Stick With Dogecoin?

We mentioned earlier that Dogecoin is inflationary and has limited real-world uses, but the story doesn't end there. Although Dogecoin has seen limited adoption as a form of payment over the past year, that could change.

Around 2140, there won't be any more Bitcoin left to mine. In contrast, Dogecoin's supply was designed to increase at a set absolute rate, guaranteeing a steady increase in supply over the long term. The supply of Dogecoins increases at a rate of around 5 billion per year once mined.

Related: How to Buy Dogecoin (And What Precautions You Should Take)

While the number of Dogecoins can increase infinitely, it'll likely reach a practical limit. Since the coin's growth is predictable, it's easier to use as a currency to buy goods and services. So, the possibility of broad acceptance in the future may make Dogecoin worth keeping.

That's not all. Dogecoin is expected to migrate from proof of work (PoW) to proof of stake (PoS) to lower its energy consumption and increase transaction speeds. Until now, Dogecoin, like Bitcoin, has relied on PoW to validate transactions.

The shift to PoS would be positive for Dogecoin owners because PoS would allow anyone who owns the coin to validate transactions. Plus, when a new block is added to the blockchain, they'd receive a fixed percentage of the pledged assets as compensation. So, if you own Dogecoin, it may be a good idea to hold onto it to see if the proposed shift to PoS becomes a reality.

Another thing to keep in mind before selling Dogecoin or any other crypto is the potential tax implications. If you hold Dogecoin, your positions equal unrealized gains or losses. Once you sell the coin, you may face a substantial tax bill. So, it's important to set aside a sum of money to cover these costs when it's time to file.

Should I Sell My Dogecoin?

Deciding when to sell Dogecoin is a personal decision based on your unique situation. While there are many reasons to sell the meme coin, there are also several reasons you might want to keep it. Given the volatility of Dogecoin and cryptocurrencies in general, it's best to invest only the amount of money you can afford to lose and always complete as much research as you can before investing any money at all.