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Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
Dogecoin, a cryptocurrency promoted by Twitter owner Elon Musk, is popular with some amateur investors. It is known for the internet meme of a type of Japanese dog breed, Shibu Inu, that has subsequently become its mascot.
At the beginning of April, Mr Musk replaced the blue bird icon on the microblogging website with the Shibu Inu meme, causing the value of Dogecoin to soar by 30%.
Here are some things an investor might want to know about buying and selling Dogecoin.
Note: investing in cryptocurrencies is speculative and your entire capital is at risk. Cryptocurrencies are given to volatile price swings. The UK’s financial watchdog, the Financial Conduct Authority (FCA), issues regular warnings about the crypto industry.
The FCA reminds would-be traders that crypto assets are unregulated and high-risk. It says this means people are “very unlikely to have any protection if things go wrong, so people should be prepared to lose all their money if they choose to invest in them”.
What is Dogecoin?
Dogecoin or ‘DOGE’ is an altcoin – a cryptocurrency token other than Bitcoin.
Dogecoin was famously started as a joke in 2013 using Litecoin blockchain technology. It rapidly evolved into a prominent cryptocurrency thanks to a dedicated community and creative memes.
Unlike many other cryptos, there is no limit on the number of Dogecoins that can be created, which leaves the currency susceptible to devaluation as supply increases.
Dogecoin’s price in 2017 was £0.00016. By April 2023, its price was at £0.07. Its market capitalisation currently stands at £11.3 billion.
How to buy DOGE in 4 steps
1. Choose a crypto exchange or broker
Both a crypto exchange and a crypto broker can help investors buy DOGE, but the two are slightly different.
An exchange is a platform on which buyers and sellers can trade cryptocurrencies. A broker is an interface that interacts with exchanges on behalf of an investor.
Some exchanges only deal in crypto, so if someone is new to investing and needs to use a fiat currency (for example, sterling in the UK) to buy crypto, they’ll need to make sure they choose an exchange that accepts it.
If an investor chooses a broker instead, be aware of its rules around moving the assets off a brokerage platform because some brokers don’t allow investors to move holdings out of an account. If an investor wanted to store their DOGE in a crypto wallet for added security, this would not be possible.
Read a list of FCA-registered cryptoasset companies here.
2. Choose a payment method
Most exchanges let investors add funds to their account using a credit or debit card, bank account, crypto wallet or other payment service. Transaction fees may apply, and the payment method may have a bearing on the total amount paid.
Use a credit card and the card issuer may treat it as a cash advance, which will be subject to a higher rate of interest than a normal purchase.
3. Buy DOGE
Within the chosen exchange, investors can find the DOGE currency option and enter the amount they want to invest.
4. Select secure storage
Unlike a bank account holding fiat currency, cryptocurrencies like DOGE aren’t protected by the Financial Services Compensation Scheme. This means investors would not be entitled to reimbursement if their DOGE were stolen, they lost their access codes, or if the exchange/broker in question went bust.
A broker might not provide any choice about where DOGE is stored, but while an exchange might not provide an integrated crypto wallet, investors are free to store it in wallets elsewhere – whether ‘hot’ or ‘cold’.
Hot wallets are stored online, making them more convenient but also more exposed to hackers.
Cold wallets are external storage devices such as hard drives or solid-state drives. They’re arguably more secure but if an investor lost their access codes there may be no way to ever access their assets again.
Whichever option an investor goes for they may be charged a fee for exporting their DOGE to an external wallet.
What can you do with Dogecoin?
Many investors might buy and hold Dogecoin simply to speculate on its value, hoping to sell the asset for a higher price than they paid for it.
However, it is possible to actually spend Dogecoin online. Car manufacturer Tesla, for example, accepts DOGE in its online store. Streaming platform Twitch also allows users to pay for subscriptions to Twitch channels with Dogecoin.
Some alternative ways to invest in DOGE
Buying shares in an organisation which uses or owns cryptocurrencies and the blockchain that powers them is another way to invest in cryptocurrency. If the company is subject to regulatory scrutiny, an investor may feel this is a more secure way to invest.
Nvidia (NVDA), for example, is a manufacturer of graphics processing units which are used by cryptocurrency miners. Paypal (PYPL), meanwhile, allows users to buy and sell select cryptocurrencies.
Note: Nvidia and Paypal are used for illustrative purposes and are not share recommendations. Investing in publicly traded companies is no guarantee of making money or even recouping an investment. An online investing platform or trading app is needed to get started.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
Frequently Asked Questions (FAQs)
Is Dogecoin a good investment?
All cryptocurrencies are unpredictable and volatile. If someone wants to invest in DOGE, they should expect their assets to go down in value as well as up.
DOGE is uniquely susceptible to price shocks thanks to its backing by Twitter owner Elon Musk. For example, Musk changed the social media platform’s logo to the altcoin’s mascot and its value jumped by around 30%.
The Financial Conduct Authority (FCA) warns anyone considering investing in cryptocurrency to be prepared to lose all of their money.
What’s the easiest way to buy Dogecoin?
Opening an account with a major crypto exchange such as Coinbase or eToro is the easiest way to buy Dogecoin. We’ve ranked our pick of the best crypto exchanges here.
Is it possible to buy Dogecoin with GBP?
Yes, if investors want to use fiat currency (Sterling) to buy Dogecoin, they’ll find all major exchanges allow you to do so.
What’s the difference between Bitcoin and Dogecoin?
Bitcoin is the world’s first, oldest and most valuable cryptocurrency. Dogecoin was created as a parody of cryptocurrencies. The former is worth tens of thousands of pounds per token, while the latter is worth pence.
Bitcoin is more widely accepted as a payment method than DOGE.
The main technical difference between the two assets is that Bitcoin’s supply has an upper limit, while DOGE will be issued indefinitely. Limiting supply increases scarcity, which can put upwards pressure on values.
How much does it cost to buy Dogecoin?
One Dogecoin costs roughly £0.06, at the time of writing.
Investors interested in buying Dogecoin through an exchange would most likely have to make a minimum deposit of £10 into their account, even if they only wanted to spend £0.07 on a single Dogecoin.
This news is republished from another source.