New Study Finds Dogecoin Boosts Returns With Minimal Risk

A recent study by a crypto investment firm, 21Shares, reveals that even a small 1% allocation to Dogecoin, when combined with Bitcoin in a growth-oriented portfolio, can significantly enhance returns without substantially increasing risk.

Through various portfolio simulations, 21Shares demonstrated that incorporating Bitcoin and Dogecoin into a traditional 60/40 stock-bond portfolio boosted average annual returns from 7.25% to almost 9%. Importantly, risk-adjusted performance also improved, showcasing higher Sharpe ratios and only a minor increase in drawdowns. The report highlights the importance of consistent, ideally monthly, rebalancing to mitigate volatility.

The firm's rationale for including Dogecoin centers on its low correlation with traditional finance and the broader cryptocurrency market, coupled with its history of substantial price gains. This suggests Dogecoin acts as a genuine diversifier, moving beyond its meme-coin origins.

21Shares also presented projections for Dogecoin's potential price movement. A conservative estimate, assuming 10% annual growth from its 2021 high of $0.73, projects a price around $0.38 by the end of 2025 – more than double its current price, but short of a new all-time high.

A moderate projection anticipates Dogecoin maintaining a 3% share of a $5 trillion cryptocurrency market, resulting in a market capitalization of approximately $150 billion and a price of roughly $1.

A bullish scenario, based on Dogecoin's historical compounded annual growth rate of 189% (from the 2018 low to the 2022 cycle bottom), suggests a potential price as high as $1.42. This outcome would necessitate strong retail demand, increased utility, and further integration into major platforms like Elon Musk's X.

21Shares concludes that for investors employing a structured and disciplined approach, Dogecoin may represent a worthwhile, calculated risk, transcending its initial perception as a fleeting internet trend.