Despite a strong community and extraordinaire marketing efforts, the Dogecoin price has consistently declined for the majority of 2014.
Despite strong community support and outstanding marketing efforts, the Dogecoin price has declined consistently for the majority of 2014. The reasons for the Dogecoin price decline are not instantaneously clear, albeit the decline may be related to Dogecoin’s economic specimen. If Dogecoin does not recover soon, Reddcoin may challenge its place spil the leading social and tipping currency.
Dogecoin Price Decline Resumes
Dogecoin investors should be worried. Despite having one of the strongest communities spil well spil some of the most innovative marketing projects (e.g. the NASCAR Josh Wise Dogecar sponsorship) ter the cryptocurrency universe, the Dogecoin price is falling, and there is no floor te look.
Overheen the past 90 days, the Dogecoin price
from 111 satoshis on April 29 to 37 satoshis on July 28. Spil the CoinMarketCap chart below indicates, the Dogecoin price decline has bot fairly stable. Dogecoin’s USD market cap has fluctuated based on the price of Bitcoin, but Dogecoin’s price against Bitcoin has consistently declined.
This 90-day Dogecoin chart demonstrates how the Dogecoin price fell from 111 satoshis to 37 ter less than Trio months.
The Role of Inflation te the Dogecoin Price Decline
The Dogecoin price fall could be tied to the coin’s inflationary economic proefje. The Dogecoin developers primarily planned on capping Dogecoin at 100 billion coins, but the source did not include the necessary code to cap the coins. Upon realizing this error, the developers considered eliminating inflation, but they ultimately determined to leave Dogecoin without a currency cap.
Under Dogecoin’s distribution proefje, harshly Five billion coins will be created annually after the initial 100-billion coin distribution phase is finished ter January 2015.
Inflation drives prices down because coin-holders believe the growing money supply will dilute the value of their investment. Consequently, miners and investors will liquidate their holdings rather than save them long-term. Community stalwarts may hold their coins despite a price decline out of loyalty, but most average investors will turn to rivaling currencies with non-inflationary models.
Tho’ inflation will certainly affect the Dogecoin price te the future, there is a silver lining. Because the Dogecoin developers have immobilized the rate of fresh Dogecoins that will be created each year, the rate of inflation will decline every year. This means inflation will have a decreasing effect on the value of Dogecoin overheen the long term.
Will Reddcoin Challenge Dogecoin?
Dogecoin’s tipping empire could face a challenge from Reddcoin, the up-and-comer branded spil the “social currency.” Like Dogecoin, Reddcoin is inflationary. The Reddcoin supply inflates at a compounded annual rate of 5%. Because the rente compounds, Reddcoin will actually inflate at a higher rate than Dogecoin beginning te 2016.
However, unlike Dogecoin, Reddcoin is taking steps to ensure that inflation does not scare investors away. On August Two, Reddcoin will transition from Proof of Work (PoW) to Proof of Stake Velocity (PoSV). PoSV is slightly different from traditional Proof of Stake (PoS), but future coins will be created similarly to other PoS coins. Under PoSV, fresh coins will be minted rather than mined. Reddcoin holders can mint fresh coins by keeping their Reddcoin wallets open and running. On average, a Reddcoin holder’s stake will build up 5% annual rente, which is just enough to ensure their investment does not lose value due to inflation. Te theory, this secures the network by encouraging the community to operate knots.
Reddcoin’s fresh strategy seems to be paying off. Spil the Dogecoin price has declined, Reddcoin’s market cap has soared. After remaining constant at about $1 million for most of May and June, Reddcoin’s market cap has soared via July. At present, Reddcoin’s boasts a market cap of $Five.Trio million, which places it 14th ter total market cap. Presently, the Reddcoin price sits at 33 satoshis. If the Reddcoin price proceeds to increase, it will reach parity with Dogecoin ter the very near future.
The Reddcoin price rose across July. Could this explain the Dogecoin price fall? Courtesy of CoinMarketCap
Nevertheless, investors should remain cautious about Reddcoin. PoSV launches te less than a week, so part of the latest Reddcoin pump could be due investors making short-term speculations. Spil you can see from the chart above, the Reddcoin price has experienced several significant corrections after quick pumps. Reddcoin may have staying power, but investors should be ready to face 24-hour price declines of spil much spil 20% for the foreseeable future.
The rise of Reddcoin does not pose a good omen for the Dogecoin community. However, Dogecoin’s troubles extend beyond coin prices and market cap. Dogecoin faces long-term hashrate issues that could compromise the security of its blockchain. Litecoin creator Charlie Lee has proposed that Dogecoin could protect itself by merge-mining with Litecoin. However, the Dogecoin community has, thus far, rejected Lee’s solution.
Dogecoin may not be dead, but its bill of health is far from clean.
Disclaimer: The author holds petite amounts of both Dogecoin and Reddcoin.