Before you buy dogecoin, consider these 3 things

Before you buy dogecoin, consider these 3 things

Maybe you’ve seen one too many headlines about the explosive rise in value of dogecoin, or heard one too many stories about someone making a life-changing profit off the cryptocurrency, and now you’re ready to get in.

You might be thinking, so what if the coin started out as a joke or you can’t pronounce it? It’s soared to 60 cents from under a penny just a month ago, and you don’t want to miss out.

Before you buy, however, below are some helpful things to consider.

1. Suspecting it’s a bubble won’t help you
Most investors can explain what a bubble is: It’s what happens when a good’s price far exceeds its real value.

And those considering buying dogecoin probably know that the digital token’s cost, which is up by more than 12,000% over the year, isn’t backed by much more than the hope that it will just keep getting more expensive.

That speculation is, of course, what fuels a bubble.

But knowing that dogecoin hasn’t actually become a significantly more valuable product over the last year isn’t likely to prevent people from trying to take advantage of the situation to make a profit, experts say.

People buy assets even when they know they’re overvalued, “because they expect prices to go even higher,” said Bruce Mizrach, an economics professor at Rutgers School of Arts and Sciences.

And, he said, “they all believe that they can exit before the bubble crashes.”

Just remember: That’s what everyone else is thinking.

“By the time most individual investors get into a rising investment, it’s often too late,” said Kent Baker, a finance professor at American University.

  • 2021-05-08