The cryptocurrency markets have matured quite a bit over the past decade. Even Dogecoin (CCC:DOGE-USD), which started as a meme or joke token in 2013, could be viewed as a profitable investment these days.
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But does it really make sense to own Dogecoin now?
A certain wealthy and eccentric celebrity seems to believe this. It has such a huge impact on asset prices that it can evidently move entire segments of the market with a single one Twitter (NYSE:TWTR) post Office.
At the same time, a certain group of Reddit users have been able to move the Dogecoin price quickly and far – and it’s possible they could spark another bull run.
None of this has anything to do with the actual value of the token. But does it still matter then? In these crazy times, traders need to adjust their strategies whether they are ready or not.
If Dogecoin really started out as a joke, maybe we shouldn’t expect the price movement to be rational.
Still, the token’s price movements in 2020 were quite neat. Throughout the year, while there were peaks and valleys, the price stayed below a penny.
The cops got a little enthusiasm before Tesla (NASDAQ:TSLA) and SpaceX Founder Elon Musk tweeted: “Dogecoin could be my favorite cryptocurrency. It’s pretty cool. ”
That tweet wasn’t enough to cause a major outbreak. However, it was a harbinger of Musk’s later enthusiasm for this once-obscure digital asset.
In fact, Musk’s apparent love affair continued in late 2020. In particular, on December 21st, he temporarily changed his Twitter bio to “Former CEO of DogeCoin”.
Don’t forget about Reddit
Let’s not assume that Musk is the only influence on cryptocurrency prices. A now famous subreddit called r / WallStreetBets has also exerted considerable power over asset prices.
On January 28, 2021, Twitter user @WSBChairman posted a seemingly innocent tweet asking, “Was Doge ever on a dollar?”
The day before, the same Twitter user asked: “Many of you are talking about Dogecoin. What’s this? A meme crypto? “
Of course, @WSBChairman knew the answer to these questions. I assume that this was at least ridicule and possibly the all-clear for r / WallStreetBets participants to raise the Dogecoin price.
In fact, within a few days of posting these tweets, the price was raised to a nickel price. The r / WallStreetBets have demonstrated their ability to raise asset prices. This is one reason not to take the short side of the trade.
Musk eyes the moon
Musk continued his series of pro-Dogecoin tweets:
- February 4, 2021: Musk tweeted the word “Doge” along with an image of a rocket shooting at the moon. On the same day he called Dogecoin “the people’s crypto”.
- February 10: He tweeted, “Bought Dogecoin for [Musk’s son] lil X, so he can be a toddler hodler [i.e., a buy-and-holder of the asset]. ”
- March 12: Musk said on Twitter that the Coinbase cryptocurrency platform should list Dogecoin.
- April 1: He notoriously tweeted: “SpaceX is going to put a literal Dogecoin on the literal moon.”
The April 1 tweet had a significant impact on the price of the token, increasing it by 32% from around 5 cents to around 7 cents.
It is clear that the effects of Musk must be taken seriously, whether they are rational or not.
The bottom line
Was the “literal moon” tweet just an April Fool’s joke? Or was it a serious explanation of Musk’s intention to fly a crypto coin into space?
To be honest, I have no idea what is making Musk tick or what he was thinking when he sent this tweet.
All I know is that Musk seems to really like Dogecoin, and its power to move asset prices means it is not advisable to bet against him.
At the time of this writing, David Moadel held positions (either directly or indirectly) in any of the securities identified in this article.