Want to Buy Dogecoin? What to Know Before You Purchase

Dogecoin may be making headlines, but make sure it's right for you before you buy in.
Chris DavisJun 29, 2021

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For years, dogecoin (pronounced dowzh·koyn) existed on the fringes as a joke cryptocurrency that traded for less than a penny. But by spring 2021, the shiba inu-themed coin found its stride — and its place on major cryptocurrency trading platforms.

Of the cryptocurrency platforms reviewed by NerdWallet, seven currently offer dogecoin: Gemini, SoFi Active Investing, Webull, Robinhood, eToro, Coinbase and Binance.US. These platforms made it easier than ever to trade the coin, and in May 2021, dogecoin had reached a price of more than 70 cents and a market capitalization of $88.8 billion.

To put that in context, at dogecoin’s May peak, it would have ranked among the 100 largest companies in the S&P 500 in terms of market cap. Its price has since slid significantly, but it’s still among the 10 largest cryptocurrencies by market cap.

But don't just buy into the hype. Before you add dogecoin to your portfolio, make sure you know what you're getting into. Here are three things to consider before buying dogecoin.

What gives dogecoin value?

To understand what gives any cryptocurrency value, it’s important to know the basics of blockchain technology, and what led to the formation of altcoins like dogecoin.

For context, investors may see value in bitcoin because it was created to be a new, better way to record financial transactions. Ethereum investors often discuss the network’s ability to run smart contracts — agreements that execute automatically if certain conditions are met — as its main value driver. The scores of other cryptocurrencies and tokens that have been developed typically seek to improve upon an existing coin, or provide a new, blockchain-based solution to an existing problem.

So why was dogecoin created, and what gives it value?

Billy Markus, co-founder of dogecoin, has written that he started dogecoin as a joke to bring some lightheartedness, kindness and generosity to the crypto world. Dogecoin devotees often use social media to hark back to some of the coin’s guiding principles, including charity, fundraising, support of one another, cryptocurrency advocacy and making memes. And the dogecoin crowd has walked the walk: In 2014, the Dogecoin Foundation raised more than $50,000 in dogecoin to help the Kenyan drinking water crisis, and that same year, a group of dogecoin holders raised $25,000 in dogecoin to help send the Jamaican bobsled team to the 2014 Olympics.

But perhaps the project’s primary message is summed up best by a common dogecoin Reddit rallying cry, which notably forms an acronym of DOGE: "Do Only Good Everyday."

So, dogecoin doesn’t have any real intended purpose beyond being a driver of good in the world, and it wasn’t created with the intention of enriching any person or business. Without a true way to value the currency in any traditional sense, its value — in terms of U.S. dollars — depends entirely on the market. In other words, dogecoin will be worth whatever someone else is willing to pay for it at any given moment. While this is one component of just about any security traded on the secondary market, dogecoin’s lack of any traditional value means its price is solely dependent on these market forces.

How will dogecoin fit into your portfolio?

Given their volatility, emerging status and low regulation, all cryptocurrencies are still considered alternative investments, which investment rules of thumb say should make up the smallest portion of your investment portfolio. The traditional advice says you should try to contribute to tax-advantaged retirement accounts, such as an IRA or, if available, a workplace 401(k). If you’re already contributing to or maxing out either of these accounts, you could consider opening a supplemental taxable brokerage account, as well.

And what can you invest in with these accounts? A good place to start may be using these accounts to invest in highly diversified, low-cost index funds. They may not be as exciting as dogecoin — don’t expect any 13,000% gains here — but they’re a lot less volatile and, in the long term, returns are more consistent. Over the past several decades, the S&P 500’s annualized average comes out to about 10%.

If you’ve already built a diversified portfolio of low-cost index funds via tax-advantaged accounts or taxable brokerage accounts — and have a plan to regularly contribute to these accounts — you may be in a place to add alternative investments like cryptocurrencies to your portfolio, but be sure you fully understand the risks involved.

How much dogecoin can you afford?

To determine how much to invest in dogecoin, ask yourself this: If you lost your entire investment tomorrow, would you still be financially sound? Sure, you’d be bummed, but would you still have your core portfolio of diversified, long-term investments and enough cash on hand to pay the bills?

If the answer is no, then you’re probably investing more than you can afford to lose. Generally speaking, it’s wise to earmark money for alternative investments only if you’ve paid off high-interest debt, built up healthy cash savings and already created a diversified portfolio.

Where to buy dogecoin

You’ll find dogecoin on a wide range of cryptocurrency exchanges, but of the crypto brokers and exchanges reviewed by NerdWallet, the following offer dogecoin. As with any cryptocurrency, be sure to check if the platform allows you to access your own digital wallet, which means you can send and receive dogecoin. Some brokers only let you buy and sell dogecoin with USD.

Broker/exchange

Can send/receive dogecoin?

Gemini

Yes.

SoFi Active Investing

No.

Webull

No.

Robinhood

No.

eToro

Yes, but limited.

Coinbase

Yes.

Binance.US

Yes.

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Coinbase
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Gemini
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The author owned BTC and ETH at the time of publication. NerdWallet is not recommending or advising readers to buy or sell BTC, ETH or any other cryptocurrency.

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