Crypto currencies are going nuts; in fact, since the COVID pandemic struck hard around March – May last year, just about everything has been going nuts, from shares, commodities, futures, and more, and crytocurrencies are just the latest to benefit

2020 saw a record influx of investment into these things, as the average person sought to get a higher return than the pathetic interest rates on offer around the world. In Australia, with record low interest rates, your money at the bank likely earns you nothing, and while you’re spending less on credit, it’s still hard to grow your savings just by parking them somewhere.

So, what if you had an itch to invest two months ago, and you thought Dogecoin was a good punt? Well, you wouldn’t be alone; like most crypto coins, Dogecoin has seen an explosion of late, only helped in the last week with a curious tweet from one Elon Musk:

As with most things that Musk tweets about, it went nuts, but it had already been going nuts.

With Musk’s tweet, Dogecoin went from $0.041 to a peak of $0.066, and while the difference of 2.5c isn’t massive, it’s a huge jump on a currency that was worth only $0.041 at the time; some 60%, in fact.

That jump is nothing compared to what’s happened in the last two months, though.

Had you invested $10,000 in Dogecoin back in December which – let’s face it – would’ve been a hell of a gamble, you’d have bought in at around $0.0046, or around half a cent per coin. At the time of writing, Dogecoin was worth around $0.061.

Doing the math, that’s a 1326% growth. Your $10,000 would now be worth $132,608.

That’s a phenomenal return for just two months, but it pays to bear a few things in mind:

  • There was no indication whatsoever that Dogecoin would take off in early December. Its value wasn’t moving, and while other currencies were – Bitcoin and Ethereum were growing quickly – Dogecoin sat fairly stagnant.
  • Investing $10,000 in anything is a bit of a gamble; while there was probably little chance that Dogecoin would’ve gone backwards, few could’ve predicted 1326% growth.

Had you invested that $10,000 in some other crypto currencies, here’s where you’d be sitting today:

  • Bitcoin would give you back $19,389 today
  • Ethereum would give you back $28,165 today

Great growth on both fronts, and arguably the more realistic investments – both Bitcoin and Ethereum had good indicators of growth already developing by early December, and so there were (and are) a lot of people who invested at those times and made some good returns.

Unlike the sharemarket though, which is driven by fundamentals, cryptocurrencies don’t really have fundamental value, they’re only driven by what others think they’re worth … and so investment, while it can be very rewarding, can also be exceedingly risky.

For those with a good appetite for risk, though, there’s clearly been some returns to have made!

Whether that run will continue though is anyone’s guess.

 

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