Dogecoin (CRYPTO: DOGE) investors have been on a wild ride this year. Between January and May, its price climbed over 15,000% to just over $ 0.74, only to lose more than half of its value a few weeks later. But as of this writing, Dogecoin is still up around 6,700% year-to-date, and the price has been steadily rising over the past month.

Investors may see this as an opportunity – maybe the Shiba Inu is finally back on track to reach the moon! But before making a decision, it’s important to consider the risks and weigh all of your options. For example, there are ways to get Dogecoin exposure in your wallet without actually buying cryptocurrency. Let’s dive in.

Image source: Getty Images.

The downside of Dogecoin

Dogecoin started off as a joke, but it has garnered a substantial following on social platforms like Reddit and TikTok. In fact, earlier this year, Dogecoin surpassed Bitcoin become the most mentioned cryptocurrency on Twitter. And of course, Elon Musk fueled that fire with a series of funny tweets mentioning Dogecoin.

But here’s the problem: Dogecoin’s value is based purely on its popularity, and the popularity is fickle. The tide can literally turn overnight, and that’s exactly what happened in May. Specifically, despite huge social success, Dogecoin is still worth a fraction of Bitcoin’s total market value, and it doesn’t offer the programmability of other blockchains like Ethereum. In short, nothing significant differentiates Dogecoin from the thousands of other cryptocurrencies that currently exist.

There is also another problem: Dogecoin is difficult to value. Investors use measures such as income, profit, and discounted cash flow to value stocks. But Dogecoin is not a cash-generating business, nor an interest-generating asset like a bond. For this reason, speculating on the future price of Dogecoin is more like gambling.

Of course, that doesn’t mean its price will drop. Someone still wins the lottery, and in a year, Dogecoin could be worth 10 times what it is today. Or it could be worth less than $ 0.01, like nine months ago. Either way, it is a very risky investment.

Woman smiling and looking at her smartphone.

Image source: Getty Images.

The advantages of Coinbase

Coinbase (NASDAQ: COIN) helps clients participate in the cryptoeconomy, the growing ecosystem that includes assets like Bitcoin and Dogecoin, as well as non-fungible tokens (NFTs), smart contracts, and decentralized financial applications (DeFi).

The company serves 68 million users, including retail investors, institutions and ecosystem partners. Its platform offers a range of products such as analytics software, development tools, and mobile wallet services. However, Coinbase is primarily a brokerage house and 85% of its revenue comes from transaction fees in the last quarter.

In other words, Coinbase thrives when the crypto market is volatile: higher trading volume means more transaction fees, which means more revenue for the business. So if you’re interested in Dogecoin – or any other cryptocurrency – Coinbase can help you capitalize on this volatility whether the price goes up or down.

For example, consider the company’s financial performance in the first half of 2021. As Dogecoin and the broader crypto market soared in the first quarter, then collapsed in the second, Coinbase saw incredible growth on the results.

Metric

H1 2020

S1 2021

Switch

Returned

$ 377 million

$ 4.03 billion

969%

Earnings per share

$ 0.15

$ 9.60

6,300%

Source: SEC Coinbase deposits. Note: Earnings per share is based on the number of diluted shares.

More importantly, Coinbase has differentiated itself from other brokerage houses through significant investments in cybersecurity and regulatory compliance. In fact, it secures client funds with the largest hot wallet crime program in the insurance market. And the company currently has $ 180 billion in assets on its platform, or 11.2% of all crypto assets in existence, making it a mark of trust. As a result, some Wall Street analysts see a significant benefit for shareholders.

Here’s the gist: Coinbase is by no means a risk-free investment. Since its IPO in April, the stock has plunged more than 30% from its opening price. But I think it’s less risky than buying Dogecoin outright, just because Coinbase is a cash-generating business that doesn’t depend on the success of a single cryptocurrency.

This is why this action seems like a smart way to get Dogecoin exposure in your wallet without actually buying Dogecoin.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About The Author

Al Worden

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