In recent years, cryptocurrency has emerged as one of the more popular asset classes among alternative investments. In particular, Bitcoin and Ethereum are two leading choices in the cryptocurrency realm.

But just like any type of asset, investing in cryptocurrency comes with risk. Namely, meme coins such as Shiba Inu and Dogecoin (DOGE 0.76%) have garnered substantial attention yet have left unsophisticated investors holding the bag at the worst possible time.

Let's look at the mechanics of Dogecoin, why I think its price could be about to go parabolic, and most importantly why investors should avoid this one like the plague.

What is Dogecoin?

Right off the bat it's important to make it clear that cryptocurrency has so far not lived up to its billing as a form of making payments. Although Bitcoin and Ethereum do have some real-world utility, neither should be considered a mainstream transaction medium.

Dogecoin is even further removed from utility. The coin was the brainchild of two software engineers back in 2013 and was essentially a joke. Thanks to some fun marketing, a cute logo, and the support from online communities on Reddit, Dogecoin started to gain some attention.

Like many cryptocurrencies, Dogecoin can have extreme price volatility. However, given the meme coin doesn't have widespread application in the real world, its value tends to be driven by fleeting investor sentiment. Social media has served as an influential outlet affecting Dogecoin's price and popularity, and one recent remark by Elon Musk has me suspecting that Dogecoin's price is about to go parabolic.

A Shiba Inu dog.

Image source: Getty Images.

Why do I think Dogecoin is about to moon?

The reason for my outlook has to do with the relationship between Musk and former president and current Republican presidential nominee Donald Trump. In recent days, Trump has teased the idea of tapping Musk for a cabinet position should he win the November election. Specifically, Trump has toyed with Musk leading an effort related to spending and budgeting, colloquially being referred to as the government efficiency office.

Well, Musk seems to be aligned with this vision and over the weekend he posted the following image on X (the social media platform formerly known as Twitter).

Do you see it? In the picture, the letters "DOGE" serve as an acronym for "Department of Government Efficiency." 

This would be borderline hilarious if the letters weren't also the ticker symbol for Dogecoin. Oh, and let's not forget that Musk has previously shown some signs of support for Dogecoin, going as far as positing the idea of accepting Dogecoin as a means of payment at his electric vehicle (EV) company, Tesla. Since the post, Dogecoin has spiked as much as 10%.

Spectate, but don't speculate

It would not shock me in the slightest if the price of Dogecoin continues to soar following Musk's whimsical social media post. I do not find it coincidental in the slightest that just days before Musk's post, he and Tesla won the dismissal of a lawsuit suggesting that he deceived investors over his enigmatic support of Dogecoin.

The big picture here is that even if Trump wins the election and does in fact place Musk in his cabinet, this does not validate Dogecoin in any sense. The two ideas are disconnected entirely. For this reason, I think investors are much better off spectating the price action of Dogecoin rather than buying it over speculation that it could be a long-term winner in your portfolio. My sense is that any increase in Dogecoin's price leading up to the election will be short-lived and the crypto is best avoided.