Cryptocurrencies have crashed. The financial media often overuses the word crash. But it actually applies in this case. Bitcoin (CCC:BTC-USD) slumped to as low as $30,000 on Wednesday morning. That’s a quick 50% decline from recent highs. Ethereum (CCC:ETH-USD) also shed as much as 50% from its recent levels.
This is causing mayhem in the altcoins as well. Dogecoin (CCC:DOGE-USD) fell to as low as 22 cents each on Wednesday. That’s a massive decline from Doge’s recent 73 cent peak.
However, Dogecoin is showing surprising resilience. On Wednesday, following the crash, Dogecoin immediately snapped back to 40 cents, making for a more than 50% recovery off the lows. That certainly ran contrary to the narrative that more speculative crypto projects such as Dogecoin would end up in freefall in a cryptocurrency bear market.
So why is Dogecoin showing strength despite the dismal broader crypto environment? The credit for that goes squarely to Elon Musk. In fact, Musk is arguably the pivotal figure in the whole cryptocurrency space, and he has greatly aided Dogecoin while going on the offensive against Bitcoin.
Celebrities Pick Their Coins
Cryptocurrencies have turned into quite the competition among investing thought leaders. You have someone like MicroStrategy (NASDAQ:MSTR) CEO Michael Saylor who is heavily committed to Bitcoin and has shown less affinity for the altcoins.
On the other hand, Barstool Sports‘ Dave Portnoy recently started promoting lesser-known altcoin SafeMoon. Meanwhile Elon Musk and Mark Cuban, among others, have embraced Dogecoin. Many influencers are taking sides.
While many investors are talking up their crypto holdings, Musk remains the most influential. Previously Musk seemed to back cryptocurrencies generally. He made news when Tesla (NASDAQ:TSLA) started accepting payment for vehicles in cryptocurrency. In addition, Tesla bought some Bitcoin directly, converting some of its balance sheet cash into BTC.
Thus, Musk looked like a champion for the cryptocurrency ecosystem. In fact, many Bitcoin enthusiasts held Musk up as a visionary who could help Bitcoin find adoption at a broader level.
Musk’s ability to promote cryptocurrency on popular platforms such as Saturday Night Live helped coin trading reach a previously unseen level of general public awareness. Apps from the likes of Robinhood and Coinbase (NASDAQ:COIN) topped the charts as the public raced to get involved in the crypto space.
Musk Abruptly Dumps Bitcoin, Embraces Dogecoin
Musk’s fondness toward cryptocurrency as a whole has ended, however. Last week, Musk blasted Bitcoin on Twitter, saying that Bitcoin mining uses way too much electricity and is terrible for the environment. In conjunction, Musk announced that Tesla would no longer accept Bitcoin as payment for vehicles.
In subsequent days, Musk continued to tweet about Bitcoin’s energy usage. This created a window of opportunity for coins that seek to be more energy-efficient, such as Cardano (CCC:ADA-USD). Indeed, some altcoins popped to new highs on this.
Dogecoin, even though it wasn’t designed particularly for more efficient energy usage, rose as well. Musk gave this impulse a push last week when he tweeted that he was working with Dogecoin’s programmers to improve system transaction efficiency.
This led to some criticism, namely that Dogecoin has historically had very few active programmers and the co-creator of Dogecoin abandoned the project years ago. Regardless, Musk followed up, saying that he was hopeful that Dogecoin could increase block size and time while reducing fees.
Can Musk make that reality for Dogecoin? The technical challenges seem daunting. And Musk’s various businesses have sometimes struggled to deliver things — such as fully autonomous driving software for Tesla vehicles — that were promised to customers.
Still, Musk has also achieved a lot of things that seemed nearly impossible at the time. So he might be able to pull off a technical leap forward for Dogecoin.
Look, little has changed fundamentally for Dogecoin despite all the price volatility. A bet on Dogecoin is a bet on the power of memes and Elon Musk’s salesmanship. Don’t get confused and end up buying Dogecoin for other reasons. Musk is talking about trying to get a development team to revolutionize Dogecoin, but it will take a long time to transform Doge from meme to serious project, if it’s possible at all.
Rather, Dogecoin trades based on how the market feels about Elon Musk. Clearly, Musk has tremendous influence in the cryptocurrency market. Just look how quickly Bitcoin deflated after Musk raised concerns about its intensive energy usage.
So if Musk keeps backing Dogecoin, it could continue to surprise its numerous skeptics. Dogecoin is risky as an investment, but among altcoins, you could certainly do worse.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.