1 clever approach to invest in Dogecoin without purchasing it

The price of Dogecoin is beginning to rise: Here is one approach that could assist investors in capitalising on this trend.

This year has been extremely crazy for Dogecoin (DOGE) investors. Between January and May, its price soared more than 15,000 percent to little over $0.74, only to lose more than half of its worth weeks later. However, as of this press, Dogecoin is up about 6,700 percent year to date, and the price has been steadily increasing over the last month.

Investors may view this as an opportunity — perhaps the Shiba Inu is regaining its footing on the path to the moon! However, before making any decisions, it is critical to assess the dangers and explore all of your options. For example, there are ways to gain exposure to Dogecoin in your portfolio without purchasing any cryptocurrency. Let us now take a look at the details.

Dogecoin's disadvantages

Although Dogecoin began as a joke, it quickly grew in popularity on social media platforms such as Reddit and TikTok. Indeed, Dogecoin topped Bitcoin as the most referenced cryptocurrency on Twitter early this year. Naturally, Elon Musk fueled the flames with a series of humorous tweets referencing Dogecoin.

However, there is a catch: Dogecoin's value is entirely dependent on its popularity, which is subject to change. The tides can actually change overnight, as occurred in May. More specifically, despite a sizeable social following, Dogecoin is still just a fraction of Bitcoin's overall market capitalisation and lacks the programmability of other blockchains such as Ethereum. In short, Dogecoin bears little resemblance to the thousands of other cryptocurrencies already available.

Additionally, there is an issue with Dogecoin's valuation. To value stocks, investors consider factors such as revenue, earnings, and discounted cash flows. However, Dogecoin is not a cash-generating enterprise, nor is it an asset that generates interest, such as a bond. As a result, betting on the future value of Dogecoin is more analogous to gambling.

Naturally, this does not imply that its price will fall. Someone always wins the lottery, and Dogecoin may be worth ten times its current value in a year. Or, as was the case nine months ago, it could be valued less than $0.01. Whatever the case may be, this is an extremely dangerous investment.

Coinbase's perks

Coinbase (COIN) enables its customers to participate in the cryptoeconomy, a booming ecosystem comprised of cryptocurrencies such as Bitcoin and Dogecoin, as well as non-fungible tokens (NFTs), smart contracts, and decentralised financial (DeFi) applications.

68 million users, including retail investors, institutions, and ecosystem partners. Its platform includes analytic software, developer tools, and mobile wallet services. Coinbase, on the other hand, is essentially a brokerage, with transaction fees accounting for 85 percent of its revenue in the most recent quarter.

In other words, Coinbase thrives during periods of high volatility in the cryptocurrency market: increased trading volume results in increased transaction fees, which results in increased revenue for the company. Therefore, if you're interested in Dogecoin – or any other cryptocurrency – Coinbase can assist you in capitalising on the volatility, regardless of whether the price is rising or falling.

Consider the financial performance of the company throughout the first half of 2021. While Dogecoin and the broader crypto market skyrocketed in the first quarter before collapsing in the second, Coinbase experienced phenomenal growth on both the top and bottom lines.

Significantly, Coinbase has distinguished itself from other brokerages by investing much in cybersecurity and regulatory compliance. Indeed, it protects customers' assets through the insurance industry's largest hot wallet crime programme. Additionally, the business presently manages $180 billion in assets on its platform, accounting for 11.2 percent of all crypto assets, establishing it as a reputable brand name. As a result, several Wall Street experts believe that shareholders will benefit significantly from this development.

The basic fact is that Coinbase is not a risk-free investment by any stretch of the imagination. The stock has lost more than 30% of its value since its April initial public offering. However, I believe it is less hazardous than directly purchasing Dogecoin, simply because Coinbase is a cash-generating firm that is not dependent on the success of any specific cryptocurrency.

That is why this stock appears to be a prudent approach to gain exposure to Dogecoin without purchasing any Dogecoin directly.

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