The cryptocurrency markets have matured quite a bit over the past decade. Even Dogecoin (CCC:DOGE-USD), which started out as a meme or joke token in 2013, might be considered a viable investment nowadays.
But does it actually make sense to own Dogecoin now?
A certain wealthy and eccentric celebrity seems to believe so. He’s become so influential on asset prices that evidently, he can move entire market segments with a single Twitter (NYSE:TWTR) post.
At the same time, a certain group of Reddit users was also able to move the Dogecoin price fast and far – and it’s possible that they could precipitate another bull run.
None of this has anything to do with the token’s actual value. But then, does it matter anymore? In these crazy times, whether they’re ready or not, traders have to adapt their strategies.
Before the Madness
If Dogecoin really did start out as a joke coin, then perhaps we shouldn’t expect its price action to be rational.
Yet, the token’s price movements were nonetheless fairly orderly in 2020. For the entire year, while there were peaks and valleys, the price stayed below one cent.
The bulls did get a little boost of enthusiasm prior to that, when Tesla (NASDAQ:TSLA) and SpaceX founder Elon Musk tweeted, “Dogecoin might be my fav cryptocurrency. It’s pretty cool.”
That tweet wasn’t enough to induce a major breakout. Yet, it foreshadowed Musk’s later expressions of enthusiasm for this formerly obscure digital asset.
And indeed, Musk’s apparent love affair continued in late 2020. Specifically, on Dec. 21, he temporarily changed his Twitter bio to “Former CEO of DogeCoin.”
Don’t Forget Reddit
Let’s not assume that Musk is the only influence on cryptocurrency prices. A now-famous subreddit known as r/WallStreetBets has also wielded considerable power over asset prices.
On Jan. 28, 2021, Twitter user @WSBChairman posted a seemingly innocent tweet asking, “Has Doge ever been to a dollar?”
The previous day, that same Twitter user inquired, “A lot of you are talking about Dogecoin. What’s that? A meme crypto?”
Of course, @WSBChairman knew the answer to those questions. I’m going to assume that these were taunts at the very least, and possibly the all-clear signals for r/WallStreetBets participants to pump up the Dogecoin price.
And indeed, the price was pushed up to a nickel in a matter of days after those tweets were posted. The r/WallStreetBets have demonstrated their ability to juice up asset prices. That’s one reason to avoid taking the short side of the trade.
Musk Eyes the Moon
Never one to be one-upped, Musk continued his series of pro-Dogecoin tweets:
- Feb. 4, 2021: Musk tweeted the word “Doge” along with an image of a rocket shooting for the moon. That same day, he called Dogecoin “the people’s crypto.”
- Feb. 10: He tweeted, “Bought some 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 opined on Twitter that he thinks 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 considerable influence on the token’s price, causing it to rise 32% from around 5 cents to approximately 7 cents.
Clearly, Musk’s impact must be taken seriously, regardless of whether it’s rational or not.
The Bottom Line
Was the “literal moon” tweet merely an April Fool’s Day joke? Or, was it a serious statement of Musk intention to fly a crypto coin into space?
To be honest, I have no idea what makes Musk tick, or what he was thinking when he sent out that tweet.
All I know is that Musk seems to really like Dogecoin, and his power to move asset prices means that it’s not wise to bet against him.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.