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Krona strength may resurface
Market Insight – Foreign Exchange – Krona strength may resurface
Swedish economy surpasses expectations
Krona strength may resurface. Swedish growth and underlying inflation have continued to develop strongly, rising to the highest levels in over four years and beating expectations of both its own central bank (Sveriges Riksbank or the “Riksbank”), and the market consensus (see Figure 1). Yet, the EUR/SEK currency pair has risen almost 1.8%* in the past month (SEK weakening), as accommodative monetary measures aimed at limiting Krona strength have been successful. However, at the last two monetary policy meetings, there have been increasing signs that members of the Riksbank’s Executive Board view further monetary easing as unnecessary, especially given the strong outperformance of the Swedish economy and the improving financial environment. Data due in the next three weeks1 will likely reaffirm these views and potentially reduce expectations of intervention. This may remove upward momentum for the EUR/SEK and potentially cause the pair to reverse recent gains.
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Board members voice differing views
The Riksbank cut its benchmark interest rate to -0.5% in February and expanded its asset purchase programme by SEK45bn (US$4.8bn) at its April meeting. The measures were taken to ensure weakness of the Krona and reinforce its important contribution in helping lift inflation. At the last two meetings, Executive Board members have dissented when voting for additional monetary measures, or expressed a more conservative view as to the appropriate course of action. In the absence of a significant catalyst, further monetary measures to weaken the SEK are likely to be met with resistance, especially if upcoming growth and inflation data (due on the 30th May and 14th June respectively) surprise to the upside.
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Resistance ahead
The EUR/SEK is moving towards the higher end of its recent 9.15-9.5 range. Should the pair approach its 2016 high of 9.5046* then it is likely that it will face resistance (see Figure 2). This is because at such levels the Krona weakness would sit in stark contrast to the significant outperformance of the Swedish economy relative to its European peers. In Q4 15, Sweden’s GDP growth was 4.5%*, almost three times that of the Euro Area over the same period.
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Dogecoin has outperformed other major cryptoassets over the past decade, while also exhibiting a low correlation to crypto and traditional assets. This creates a compelling argument for a portfolio allocation. We tested a Bitcoin-enhanced growth portfolio, which is a traditional 60/40 infused with 3% Bitcoin, and we introduced a modest 1% DOGE allocation. Since most prospective investors likely already hold Bitcoin, this offers a lens into how the two assets can complement each other.
Despite the small portfolio allocation, every approach delivered stronger returns. The benchmark returned 7.25% annually, while DOGE-enhanced portfolios reached as high as 8.95%. Sharpe ratios improved in almost all tests, indicating better risk-adjusted returns. Volatility did slightly tick up, but drawdowns remained largely contained. Even with no rebalancing, the max drawdown only deepened by a few percentage points, underscoring that even a 1% DOGE allocation adds meaningful punch without destabilizing the broader portfolio.
Rebalancing remains essential to capturing upside effectively. Without it, returns can plateau while risk quietly compounds. Monthly or weekly rebalancing offered the best balance, maximizing returns while keeping volatility and drawdowns in check, especially during periods of broader market stress, as we’ve recently seen. Given Dogecoin’s momentum-driven nature, a more strategic approach linked to broader crypto market cycles may offer even greater optimization beyond routine rebalancing.
With the right structure, a 1% allocation to Dogecoin isn’t reckless—it’s rewarding.
Bear Case
Despite strong fundamentals and a rich cultural legacy, Dogecoin’s recent rally, fueled by post-election memecoin mania, may have front-run its true cycle potential. As attention shifts to newer narratives, DOGE risks being seen as ’yesterday’s play,’ potentially underperforming even in a rising market. Still, that wouldn’t signal a flaw in its model, just a pause in a fast-rotating cycle.
Assuming a continued 10% compounded annual growth rate (CAGR) from its 2021 peak of $0.73, DOGE would be projected to land around $0.38 by 2025—still more than 2x from today’s levels but modest relative to past cycles. More notably, this would mark the first time Dogecoin fails to reach a new all-time high in a full market cycle.
Neutral Case
Dogecoin may not dominate headlines like it did at its peak, but it still holds cultural relevance and widespread recognition. In a scenario where the total crypto market cap peaks at $5 trillion this cycle and DOGE maintains a solid, albeit slightly reduced, market share of 3% instead of its previous 4%, this would result in a market capitalization of approximately $150 billion for DOGE.
At that valuation, DOGE would trade near $1 per coin, a ~5.5x gain from current levels around $0.185. This neutral case assumes Dogecoin retains its stature as the leading memecoin, despite increased competition, with stable adoption and renewed retail interest, but without the same euphoria of the last cycle.
Bull Case
If we take DOGE’s bottom price of $0.007 just before the last bull run began and fast-forward two years to the bottom of the current cycle at $0.0585, that move reflects a CAGR of 189%. If DOGE were to mirror this explosive growth, DOGE would reach approximately $1.42.
In this scenario, Dogecoin benefits from renewed memecoin mania, increasing real-world adoption, and stronger interest fueled by regulatory clarity and potential integration with major platforms like Elon Musk’s X. A full return of retail enthusiasm and broad cultural momentum could reestablish DOGE as the breakout asset of the cycle, potentially even doubling its all-time high.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
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