Dogecoin (CCC:DOGE-USD) has lived on longer than almost anyone would have expected. It was created back in 2013, and its creator has long ago sold his Dogecoin and said the project has gone far beyond anything he imagined possible.
Somewhere along the way, it turned from a funny joke into a serious financial asset. Major crypto exchanges added it to their platforms.
Celebrities started endorsing DOGE. It reached a level of popular awareness that previously seemed impossible for a cryptocurrency.
However, the buzz is starting to fade. It seems Dogecoin hit its peak earlier this year. That’s when the price ran up from a few cents to 70 cents each at one point.
Since then, however, Dogecoin has been on the decline. Recently, the price has been lingering around the 30 cent mark, but that appears set to break soon as well.
Technical Support and DOGE
In April, Dogecoin surged from 6 cents to 40 cents in a few days. It fell back to the high 20s and then established a new floor north of 30 cents per coin.
The next month, from that base, Dogecoin surged to its all-time high around 70 cents around when Elon Musk appeared on Saturday Night Live and talked up Dogecoin’s potential.
In May, Dogecoin fell back to 30 cents on multiple occasions, finding support at that mark each time. In early June, Dogecoin made one more run, briefly topping 40 cents.
Now, though, DOGE is sliding again and is barely clinging below that crucial support level at 30 cents per coin.
If Dogecoin can’t hold that level, however, there’s virtually no technical support between here and all the way down to 6 cents.
The problem with DOGE running up so quickly is that it established almost no buying volume in the 10-25 cent range, and that means Dogecoin is in real trouble if it loses support. What goes up in a hurry can crash on the way back down.
Does Musk Have Any More Tricks in Store?
As our Faisal Humayun recently argued, the future of Dogecoin is in Elon Musk’s hands. As DOGE doesn’t have much going on fundamentally, it needs outside factors to keep traders interested.
The best chance would be that Elon Musk sends out more favorable tweets about Dogecoin. Maybe Tesla (NASDAQ:TSLA) will start taking Dogecoin as payment for vehicles, as it used to do with Bitcoin (CCC:BTC-USD).
Or maybe DOGE will become the exclusive payment method for buying voyages on Space-X. Musk is an unpredictable fellow, so who knows.
There are other celebrities such as Mark Cuban that also have taken a stand for DOGE. However, having the Dallas Mavericks basketball team take Dogecoin is more a publicity stunt than a real disruption to traditional financial payments systems.
Also, Cuban was recently involved in a massive crypto collapse. Titan, a token that Cuban endorsed, crashed more than 99% in a matter of hours following a bank run. This could cast a more skeptical eye toward Cuban’s other crypto projects, such as Dogecoin.
What happens to a meme token after the magic has ended? Unfortunately, Dogecoin holders are about to find out. Without much in the way of fundamental underpinnings, what’s left to support the price once the social media buzz fades?
DOGE doesn’t have profits or produce cash flow as most publicly traded companies do. Dogecoin doesn’t even have a strong technical or programming community to help support it.
Many cryptocurrencies could eventually disrupt traditional finance with their technical capabilities or established commercial partnerships.
Ethereum (CCC:ETH-USD), for example, has major applications built on its decentralized finance (DeFi) platform. But Dogecoin simply isn’t on the same level, or even particularly near it yet.
This is nothing against DOGE. There’s a great ethos to the coin, and it’s been a fantastic meme for months now. Without some sort of major new spark, however, Dogecoin is unlikely to continue its magical run for much longer.
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.