Per the above chart, most of those gains came after Nov. 5, which is when Donald Trump won the presidential election after campaigning on a series of crypto-friendly policies. Dogecoin investors received a special cherry on top thanks to Elon Musk, which I'll discuss further in a moment.

However, the meme-token has plunged by 55% from its post-election peak. Could it be the ultimate buying opportunity, or a sign to run for the hills? Let's find out.

The Elon Musk effect

Elon Musk has supported Dogecoin since 2019. He often posts memes relating to the cryptocurrency on social media, partakes in friendly banter with other enthusiasts, and his electric vehicle company, Tesla, accepts it as payment for some merchandise.

On May 8, 2021, Musk even participated in a Dogecoin-themed skit on Saturday Night Live. The token soared to a record high of $0.73 during the show, at which point it was sitting on an eye-popping 15,769% gain for the year. However, it also happened to mark the peak -- it proceeded to lose more than 90% of its value in the months that followed.

That shouldn't be surprising given Dogecoin's highly speculative nature, and the token remained mostly dormant during 2023 and for most of 2024. But the presidential election last November ignited a fire under cryptocurrencies broadly, as Trump promised to make America the crypto capital of the world. The U.S. Securities and Exchange Commission has even started pausing some of its legal cases against crypto companies, suggesting the industry will have more regulatory freedom to invent new use cases to create value for investors.

Shortly after Trump won the election, he also announced that Musk will run an external agency called the Department of Government Efficiency, or DOGE for short. Its goal is to help the administration cut government spending in order to balance the budget. It has no role in the crypto industry whatsoever, but investors interpreted the name of the agency as a clear reference to Musk's favorite cryptocurrency, Dogecoin, which sent the token soaring.

Dogecoin lacks real-world utility

The key to creating value for any currency is adoption. Businesses need to accept it as payment for goods and services, because that gives consumers a reason to buy it and hold it. Unfortunately, only 2,025 businesses accept Dogecoin worldwide, and many of them are obscure providers of internet and crypto services, and even gambling websites. It's a drop in the bucket considering there are more than 350 million registered companies globally.

With well-grounded fears of a trade war swirling and causing volatility in the traditional financial sector as well as in cryptocurrencies, you don't have to be a particularly skittish investor to be concerned about your portfolio at the moment. Even quality assets like XRP (CRYPTO: XRP) and Bitcoin (CRYPTO: BTC) are showing some shakiness.

But between those two, if a full-on trade war actually does break out as a result of the Trump administration's policies, which one has a better chance of holding up, or perhaps even climbing? Let's analyze the argument for each, starting with XRP.

The setup looks bearish here

For XRP to gain in value, at least two things need to happen. First, banks and financial institutions need to buy and hold the coin, and they need to believe that doing so will help them avoid currency exchange fees as well as international money transfer fees; they need to see that using the crypto is a better option than legacy money-transfer technologies.

Second, those banks need to transact with one another regularly across international borders, thereby generating usage fees, which are paid back to the XRP network.

If there is a trade war, the incentives for the first scenario to continue occurring will remain the same, and there could be some positive effects for XRP. The actual size of each transfer may even increase, if parties need to include the costs of tariffs in their transfers. That won't necessarily generate much more in fees, though, as XRP only charges a fraction of a penny per transaction.

The problem here is that extensive tariffs may reduce the volume of goods exchanged as a result of buyers facing higher prices. With fewer goods exchanged, fewer international money transfers need to happen. And that means XRP will almost certainly generate less in fees if there's a trade war.

There's no rule that says the price of the coin needs to drop if that happens. But if trading volumes drop, it isn't good news for investors, which detracts from the argument for buying XRP if the trade situation worsens.

Is this coin a real safe harbor?

Bitcoin's price hasn't changed much at all over the last three months, which suggests that the market is ambivalent about its value holding up in a trade war.

And it's hard to articulate precisely how the coin's value would decrease if the barriers to trade became higher for the U.S., aside from a generalized retreat from risk assets that it might cause as investors give in to fear. It isn't used extensively as a medium of exchange for trade payments, or for much else. Nor would its core value-generation mechanisms -- scarcity and mining difficulty -- change whatsoever.

It's faintly possible to conceive of a deep recession in the U.S. driven by a trade war causing investors to dump their coins to help pay their daily expenses. But that isn't very likely, at least not at the moment.

What's more likely is that rising costs stemming from worse trade terms would reduce the capital that institutional investors would be willing to allocate to Bitcoin.

It's also entirely possible that investors would be more interested in buying the crypto as a result of any inflationary pressure caused by a trade war. If inflation becomes a major concern again, it might even send the coin significantly higher, since it's considered a hedge. Still, compared to harder assets like gold or other commodities, it's not clear that this coin will preserve its value very well in truly turbulent economic times.

Nonetheless, compared to XRP, Bitcoin has fewer risk surfaces if the trade situation continues to deteriorate for the U.S. So, if there's a big dip prompted by panic, it's probably smarter to be buying it than selling it. Investors should also keep in mind that trade wars end eventually, and that there isn't really anything about a trade war that detracts from the investment thesis for this coin.