Dogecoin Has Soared by 350% This Year. Will It Be a Better Buy Than Bitcoin in 2025?

The total market capitalization of all cryptocurrencies in existence recently hit a new record high of $3.5 trillion, so it's safe to say the industry is having a spectacular year.

Roughly $1.9 trillion of that market cap is attributable to Bitcoin (CRYPTO: BTC) alone. It's the undisputed leader of the cryptocurrency industry, and it has more than doubled in value this year. However, some of the more speculative -- and risky -- cryptocurrencies have performed even better in 2024.

Dogecoin (CRYPTO: DOGE) is a novelty token that was created in 2013 as a joke. Nonetheless, it has delivered a whopping 350% return this year, so investors are laughing all the way to the bank. President-elect Donald Trump and his mega-supporter Elon Musk are responsible for a big chunk of that rally, and I'll explain why in a moment.

Momentum is on Dogecoin's side as we head into the new year, so will it be a better buy than Bitcoin in 2025?

Image source: Getty Images.

The Trump-Musk effect

Musk's influence over Dogecoin dates back to 2021. Throughout that year, he called Dogecoin his favorite cryptocurrency, promoted it regularly on social media, and he even appeared in a Dogecoin-themed comedy skit on Saturday Night Live (SNL) on May 8 that year.

Dogecoin started 2021 at a price of $0.0046, and during the next five months, it soared 15,769% to a record high of $0.73. That peak was set on the night of Musk's SNL appearance, but once investors realized he didn't have a real plan to back up his verbal support, Dogecoin plunged. By mid-2022, it had lost 92% of its value.

The token flatlined during 2023 and 2024, and it was even trading near its 52-week low as recently as September. However, when Trump won the election for the presidency on Nov. 5, Dogecoin took off like a rocket (along with most other cryptocurrencies). Speculators believe the Trump administration will approach the crypto industry with a light regulatory touch, paving the way for more use cases to support its value.

Musk was one of the biggest supporters of Trump's campaign. As a result, Trump recently appointed Musk as the head of a new entity called the "Department of Government Efficiency," or DOGE for short. That's a clear reference to Musk's favorite cryptocurrency, which added even more fuel to Dogecoin's rally -- even though there is no suggestion the token will play a role in the new department.

Dogecoin lacks fundamentals, whereas Bitcoin has real upside catalysts

Despite Dogecoin's big gain in 2024, it's still trading below its all-time high from 2021. Bitcoin, on the other hand, continues to set new record highs, and it's closing in on a milestone price of $100,000 per coin.

A lack of fundamentals can be blamed for Dogecoin's failure to fully recover from its 2022 plunge, whereas Bitcoin seems to have a growing list of positive catalysts. To be clear, neither have succeeded as currencies -- just 8,875 merchants worldwide accept Bitcoin as payment for goods and services (according to Cryptwerk), and a mere 2,515 are willing to accept Dogecoin. However, Bitcoin is proving itself as a true store of value, perhaps like a digital version of gold.

Earlier this year, the Securities and Exchange Commission (SEC) approved several Bitcoin exchange-traded funds (ETFs), which gives financial advisors and institutional investors a safer, more regulated way to own the cryptocurrency. That opens the door to much broader adoption, which is a tailwind Dogecoin may never unlock.

Many top Wall Street analysts now have bullish price targets for Bitcoin. Cathie Wood's Ark Investment Management thinks it could soar to almost $1.5 million per coin based on eight potential use cases. A few of them include:

• Companies and governments could eventually hold Bitcoin alongside their cash reserves as a hedge against economic forces like inflation.
• Bitcoin could become a firm part of the institutional investment industry's asset base thanks to the widespread availability of ETFs.
• As I mentioned earlier, Bitcoin could become a digital version of gold.

2021 was a lesson in speculative frenzies

Dogecoin's rally this year feels very similar to its rally in 2021. The token doesn't have any new use cases to support its recent increase in value, so I think investors should be on high alert for yet another plunge, similar to what happened in 2022.

On the other hand, the number of reasons to own Bitcoin seems to be growing. If it truly does become accepted by most investors as digital gold, that could pave the way for substantial upside in 2025 and beyond.

The current value of all mined gold reserves currently stands at almost $18 trillion, so for Bitcoin's market cap to match that, the price per coin would have to soar about 850% from where it trades as of this writing.

I'm not suggesting that will happen, because there is a speculative element to all cryptocurrencies, Bitcoin included. Investors simply buy them with the hope of higher prices at some point in the future. But it's a potential target that an increasing number of investors might be aiming for, so I predict Bitcoin will be a much better buy than Dogecoin in 2025.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.