Dogecoin: Market Crash Could Bring Opportunities in Elon Musk’s Favorite Cryptocurrency

This article is written exclusively for Investing.com.

  • Elon Musk’s Favorite Cryptocurrency
  • 11th active in its category
  • Cryptocurrencies go up and down based on sentiment
  • Low nominal prices attract speculators
  • If Bitcoin and Ethereum Take Off, DOGE Could Become More Attractive

Cryptocurrencies, fiat currencies and have one thing in common. Their intrinsic value depends on the market consensus on value. The value of cryptocurrencies and fiat currencies is based solely on belief. While gold and silver have industrial and decorative uses, investment demand, or belief in their value, is the primary determinant of the price path of least resistance.

Gold is the metal that governments, central banks and monetary authorities hold as part of their foreign exchange reserves, confirming gold’s role in the global financial system. Silver is much more volatile by comparison, but the price tends to follow its precious metal cousin up and down. Silver’s lower cost and greater volatility attract much more speculative interest when the price moves up or down.

In the world of cryptocurrencies, if and are analogous to gold, that’s their money. Each DOGE unit represents a fraction of the price of Bitcoin and Ethereum and has developed a history of high price variability, making it the speculative cryptocurrency of choice for market participants looking to get on board during a rally. †

Elon Musk’s Favorite Cryptocurrency

Elon Musk’s realm is like the universe – it’s expanding. In addition to Tesla (NASDAQ:), the world’s largest maker of electric vehicles, he is the founder, CEO and chief engineer of SpaceX. The portfolio also includes The Boring Company, which tackles traffic and logistics problems in cities by building tunnels. In 2016, he co-founded Neuralink, a company that makes devices to integrate into the human brain, enabling fusion with machine technology. Musk describes the product as “a Fitbit in your skull”.

Musk has made millions from his bets in Zip2 and PayPal (NASDAQ:). Tesla’s growth has netted him billions and made him the richest person in the world. In April, he bid $44 billion for Twitter (NYSE:), the social media platform. He plans to privatize the company and expand his empire.

Musk is a modern Leonardo da Vinci (EPA:) or Thomas Edison, with a growing portfolio of diverse companies. He is also a cryptophile and has a portfolio of cryptocurrencies. In recent years, he has developed a special affinity for Dogecoin, the crypto that started as a joke and has grown into a top digital currency. Musk is so in love with DOGE that he owns a Shiba Inu puppy named Floki. The {0|Shiba}} Inu is the mascot and trademark of DOGE. Every time Musk tweets about DOGE, cryptocurrency price volatility skyrockets.

11th largest asset in its category

On May 10, DOGE was the 11th cryptocurrency in its category, out of more than 12,390.

Source: CoinMarketCap

The chart shows that DOGE’s market cap at 11.09 cents per token is over $14.78 billion. DOGE’s position provides the crypto with the liquidity and critical mass that is no joke.

Cryptocurrencies go up or down based on general sentiment

Cryptocurrencies are alternative means of exchange. Enthusiasts like Musk, Jack Dorsey and others believe that cryptocurrencies will compete with fiat currencies in the coming years. While central banks and governments can issue fiat currencies at will, cryptocurrency values ​​are unaffected by government interference. Their value is determined solely by offers to buy and offers to sell in the market.

With sentiment determining the price level and with over 12,300 cryptos to choose from, brand image and market positioning are critical success factors. Musk’s adoption of DOGE as his favorite crypto and mascot Shibu Inu has created a huge buzz.

DOGE/USD

Source: CoinMarketCap

The chart shows that DOGE was mostly at a fraction of a cent from 2013 to early 2021. Musk’s interest pushed the price to a high of nearly 70 cents per token in May 2021. At the 11.09 cent level on May 10, DOGE corrected lower along with the rest of the asset class. However, the crypto remains at multiples of its pre-2021 price level.

Low nominal prices attract speculators

The rise in , from 5 cents in 2010 to nearly $69,000 in November 2021, and the current price level of more than $30,000 per token, has sparked a speculative frenzy in the crypto asset class.

At the 11 cents per token level, investors and speculators flocked to DOGE as it traded higher and lower along with other members of the asset class. A low price per token creates a magnetic psychological pull for investors and speculators dreaming of bitcoin-like returns. The Shiba Inu brand and Musk’s participation are increasing the appeal of cryptocurrency.

Bitcoin, at around $31,000 per token, and Ethereum, at the $2,340 level, are expensive. A speculator can buy about 282,000 DOGE for the price of one bitcoin or more than 21,200 DOGE for one Ethereum token.

If Bitcoin and Ethereum Take Off, DOGE Could Offer Attractive Percent Offset

High interest rates, rising currencies and market volatility across all asset classes have weighed on cryptocurrency prices since November 2021. Bitcoin and Ethereum are the market leaders, with about 61% of the asset class market cap, and leaders tend to dictate the path of least resistance for all cryptocurrency prices.

Bitcoin and Ethereum are looking for lows. If the price action of recent years is repeated, there could be more substantial gains in the weeks, months and years to come. When they are on the rise, DOGE will likely follow as an obedient Shiba Inu pup, with Musk encouraging his favorite crypto through his new toy, the world’s number one social media platform.

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