21Shares emphasizes Dogecoin’s contribution to varied, high-yield investment portfolios.
A small allocation of 1% in Dogecoin (DOGE) has the potential to enhance portfolio returns substantially, all while keeping risks at a manageable level, according to fresh insights from a crypto investment firm.
The company’s analysis, released in April, examined the impact of adding Dogecoin to a Bitcoin-focused growth strategy.
Portfolio evaluations under stress
Results from the stress-testing revealed that a traditional 60/40 stock-bond portfolio generated an annual return of 7.25%.
In contrast, allocating 3% to Bitcoin and 1% to Dogecoin pushed annual returns to as high as 8.95%. The Sharpe ratios showed improvement in nearly every scenario analyzed, indicating a favorable risk-adjusted performance.
While the addition of these assets introduced some level of volatility, the increase in maximum drawdown remained minor, and the losses were contained even without a rebalancing strategy.
The analysis highlighted the importance of regular rebalancing, whether monthly or weekly, to optimize return potential and avoid unnoticed risk accumulation during volatile market conditions. The firm credited Dogecoin’s effectiveness to its low correlation with traditional assets and the broader crypto market, along with a robust historical performance track.
This positions Dogecoin as a sensible option for diversification, rather than as merely a speculative trend.
Future projections for Dogecoin
The analysis laid out three scenarios concerning Dogecoin’s price trajectory in the ongoing market environment: a bearish scenario, a neutral outlook, and an optimistic forecast.
In the bearish outlook, the firm suggested that Dogecoin’s recent price surge may have captured most of its potential within this cycle.
If the asset grows at an annual rate of 10% from its 2021 peak of 0.73, it could approach around 0.38 by late 2025. This would still represent more than a twofold increase from its current price but would be the first occasion where Dogecoin does not reach a new all-time high within an entire market cycle.
In the neutral projection, it was assumed that the total cryptocurrency market valuation would peak at $5 trillion, with Dogecoin holding onto a 3% market share. This scenario would place DOGE’s market cap near $150 billion, equating to a price close to $1 per coin.
This projection relies on the token’s ability to maintain its status in the memecoin sector while adjusting to rising competition and changing consumer habits.
The bullish scenario draws on historical growth trends. From its 2018 low of $0.007 to the bottom of the 2022 cycle at $0.0585, Dogecoin achieved an impressive compounded annual growth rate of 189%.
Should DOGE replicate that growth trajectory in this cycle, it could potentially rise to around $1.42. To realize this expectation, the firm emphasized the necessity of renewed retail interest, wider adoption, and integration with platforms like X.
The firm concluded that with appropriate structuring and regular rebalancing, a modest investment in Dogecoin could be both prudent and lucrative.
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