As cryptocurrency has emerged a popular alternative asset class in recent years, Bitcoin and Ethereum remain two of the most mainstream digital tokens. But some investors have taken a liking to more-speculative opportunities.

Take Dogecoin (DOGE 1.01%) as an example. Over the last year, its price has risen 18.5% as of March 17. That may seem impressive, but consider that its price had gained as much as 228% over the last 12 months, only to crater by roughly 58% during the last three months.

Clearly Dogecoin has demonstrated some extreme volatility. But with prices starting to cool, could now be a good time to take advantage of its depressed price action?

Let's explore what drove the rise to begin with and assess where the crypto could be headed over the next year.

Dogecoin's rise was short-lived

As the graph below illustrates, Dogecoin's price didn't inspire much confidence for most of 2024. Up until October, the cryptocurrency consistently hovered around $0.10.

Dogecoin Price data by YCharts.

Throughout November and December, the price went parabolic. My suspicion is that the crypto experienced outsize attention during this period as it overlapped with the presidential election.

More specifically, Tesla CEO Elon Musk was tapped by the Trump administration to lead a new effort called the Department of Government Efficiency (or DOGE). As part of his responsibilities, he has been put in charge of identifying areas of potentially wasteful spending within the federal budget.

But so what? What does this have to do with Dogecoin? Well, my thinking is that some investors bought into a narrative that DOGE and Dogecoin might be related somehow. The crypto's ticker symbol is DOGE, and Musk himself has playfully expressed an affinity for Dogecoin in the past.

After a short-lived euphoria following Election Day, I think investors began to wake up and realize that Musk's government duties are exclusive of Dogecoin -- and the selling began.

The Dogecoin mascot. Image source: Getty Images.

Not all crypto investments carry the same prospects

The chart below compares the price returns between Dogecoin and Bitcoin over the last few years.

Dogecoin Price data by YCharts.

While Bitcoin has handily outperformed Dogecoin, there's a more subtle idea I want to explore. As the chart above shows, investing in the crypto realm carries some outsize volatility compared to traditional equities across the S&P 500 and Nasdaq Composite.

But even with that caveat, fluctuations seen in Bitcoin appear to be far less pronounced than those witnessed in Dogecoin. I think a big reason for this is that unlike Dogecoin, it has garnered increasing support from institutional investors, Wall Street analysts, and even federal agencies -- which played an instrumental role in the development of spot Bitcoin exchange-traded funds (ETFs).

Where is Dogecoin headed from here?

To me, the reason Dogecoin has not seen the same support compared to other cryptocurrencies is because it does not have much utility in the real world. Bitcoin is far from a mainstream form of payment, but there has been a notable rise in its popularity across businesses and smart-money investors.

By contrast, Dogecoin's price action tends to follow hype narratives that connect dots that ultimately aren't really there. In other words, an investment in it is akin to a meme-style opportunity. For this reason, it's almost impossible to identify a definitive, concrete catalyst that could drive a rebound in its price.

Over the next year, I wouldn't be surprised to see that price witness both upward and downward swings. But ultimately, I think it will continue to fall as more investors catch on that its value in the crypto realm pales in comparison to more mainstream opportunities. I would avoid chasing any momentum in Dogecoin -- the risk of being left a bag holder is simply just too high.