3 Green Flags for Dogecoin in the Next 12 Months

Dogecoin (CRYPTO: DOGE) is still an asset without fundamental factors, but its price continues to bounce back whenever macroeconomic tides change. Ignoring the patterns driving its price risks missing out on what the next 12 months could look like for cryptocurrency, including major coins like Bitcoin (CRYPTO: BTC). Investors do not need to buy Dogecoin to learn its lesson. This token acts like a seismometer for macro liquidity and market sentiment regarding cryptocurrency, and three specific macro flows are lining up in its favor right now.

1. Cheaper Money Will Drive Investors Out of the Risk Curve Central banks are moving towards lowering interest rates, thereby reducing borrowing costs. This tends to have a positive impact on cryptocurrencies like Dogecoin. U.S. investors are predicting that the Federal Reserve will cut rates by about 0.5% by the end of 2025, similar to the signals from the Fed so far, with many anticipating the first cut to occur as early as July. Across the Atlantic, the European Central Bank (ECB) has eased rates eight times since June 2024, reducing the deposit rate to 2% and signaling that there will be at least one more move this year. Lower interest rates leave investors with plenty of cheap cash and few places to achieve reasonable returns. Therefore, a sensible move for them is to consider riskier assets more broadly, including the tail end of the risk curve. Therefore, the first money flows into blue chip stocks, followed by growth stocks, and finally large cryptocurrencies like Bitcoin, and from there into meme tokens that are almost entirely driven by momentum. If the expected path of loosening comes to fruition, Dogecoin could benefit from the re-inflationary momentum that lifted it during the liquidity waves in 2021 and 2024, and soon. Safer plays like Bitcoin will also benefit.
2. Liquidity is Expanding Everywhere The interest rate cuts are only half the story. The other half is creating raw money. The global M2 money supply index, which measures a broad gauge of cash, checking deposits, and market money balances, has recently hit a record 109 trillion dollars, increasing by 3.3% over the past 12 months. In the United States alone, the country's M2 has reached a new record high of nearly 22 trillion dollars in April, reversing two years of quantitative tightening (QT) implemented by the Fed to curb inflation. China is currently adding its own liquidity fire hose to the fight. At the beginning of May, the People's Bank of China (PBoC) cut the reserve requirement ratio for banks by 0.5%, releasing about 1 trillion yuan (138 billion dollars) into the system. Some of that money will certainly flow into the Western stock markets and the cryptocurrency sector, even with some legal barriers to doing so. Liquidity from central banks will eventually flow into households. Excess cash rarely sits idle. When households and organizations feel flush, a portion of that liquidity will find its way into speculative corners, particularly into risky assets that can triple in growth without any income to offset, such as meme money. Dogecoin often receives a large portion of such cash flows because it is culturally recognizable. If the global money supply continues to increase by 2026, meme coins may become popular again. Just remember that you will have the opportunity to invest in more serious assets like Bitcoin and benefit from the same tailwind.
3. Bitcoin is Setting the Stage Simply having liquidity cannot activate Dogecoin. It needs a spark, and at least in previous market cycles, Bitcoin has often provided that spark. Bitcoin is currently at 5% of its all-time high. Over the past five years, the average Dogecoin/Bitcoin correlation has been around 0.58, meaning that most of Dogecoin's price movements follow the trend of Bitcoin. The scenario here must be familiar. Bitcoin has reached a notable high due to favorable fundamental and macroeconomic factors, cooled down, and then short-term speculators shifted their profits to higher-octane games like Dogecoin. Although the wisdom of selling a quality asset to buy a meme coin is highly questionable, it could happen again and may pump the dog coin while creating an opportunity for other investors to buy Bitcoin while it is a little cheaper. For serious investors, the goal here is not to invest in a token that lacks cash flow or utility. Instead, recognize that macro conditions can support even the weakest ships and plan accordingly.