The cryptocurrency created in 2013 as a joke by Billy Marcus and Jackson Palmer has reached new heights of popularity, even garnering endorsement by the one and only Elon Musk. Last December, when the Tesla CEO said his company’s products could be bought with Dogecoin, the coin’s value jumped. Later on in April, Musk’s agreement to buy Twitter triggered a 30% spike in the coin’s value, while other altcoins like Solana, Polkadot, and Ether saw no such exhilaration. “The market is anticipating [Musk] may incorporate Dogecoin as a payment system, hence this rally”, explained Teong Hng of Satori Research.
Near the end of May, Musk sent out a tweet that his company SpaceX would be accepting Dogecoin as payment, which saw the coin off on a rally of 4.63%, leaving it worth $0.0814 on May 28th, while its competitor Solana slumped 5.3%. This was in the same month in which crypto confidence was sorely shaken by the sudden demise of the Terra USD stablecoin. The incident highlighted the volatility inherent to crypto trading values, which depend on trader confidence. When confidence is drained away, traders tend to sell en masse, potentially spurring others to do the same, which quickly depresses the coins’ values.
Not long before this, in March 2021, consumers had been led to believe that depositing Terra coins in the crypto bank Anchor would yield huge returns of 20%, and as a result, in the year as a whole, $10 billion in Terra stablecoins were brought into existence. Despite the enormous dent to the crypto market in May 2022, when this dream evaporated, Musk’s message carried enough weight to propel DOGE against the tide, and another tweet sounded out the very next month. In late June, the CEO repeated to his followers that DOGE would be honored at Tesla and SpaceX, sending the coin up 7.9%. (This time, Solana and Polygon were also on a rally). Scaling out to see the bigger picture, don’t forget that Dogecoin was still at a 63% loss for the year at that point. Join iFOREX news as we take a deeper look into the recent story of DOGE and consider where the future might take it.
In mid-June, stocks in the US tumbled when the Fed hiked interest rates more than they had in tens of years, leaving the S&P 500 at a low point it last touched back in 2020. The Nasdaq 100 lost 4% on the 15th of the month. The effects of the hikes were also felt in the arena of crypto trading, where Ether lost 8.3%, adding to the 4% it had lost in the first two weeks of June. “Bitcoin today is a risk-on asset,” explained David Mercer of LMAX Group. “It’s not different from stocks. Why should anyone be surprised with the volatility?” The selloff also affected other crypto trading names like Solana, Cardano, and Dogecoin, which saw significant losses, as well as Polkadot, which was down a hefty 10%. All this contributed to the $1 trillion loss in value the crypto market had experienced so far in the year.
Inflation statistics in the US in August showed an improvement, which sparked the hope that the Fed would hold back on aggressive rate hikes. The result for risk assets was a rally in the second week of the month, and, in cryptocurrency trading news, the price of Dogecoin spiked by as much as 14% in five days. Shiba Inu gained a giant 40% in the same period, while Ether was holding close to $2,000 and Bitcoin near $25,000. One thing spurring the crypto market was the anticipation surrounding Ethereum’s imminent software upgrade – known as The Merge – which is expected to take place in mid-September. Dogecoin and Shiba were also working on some upgrades of their own. “Dogecoin and Shiba Inu have broken out over the weekend, clear evidence that the retail investor is back”, suggested Hayden Hughes of Alpha Impact. In terms of market cap recovery, the crypto sector had gone from a value of $875 billion on June 19th to one of $1.2 trillion by August 15th. Will the cryptocurrency trading market see an uptick come autumn? Only time will tell.
Even during this cryptocurrency trading rally, however, some analysts issued warnings. The trouble with altcoins like Shiba and DOGE, said Cici Lu of Venn Link Partners, is that “When a bit of demand comes through, they hit a liquidity pocket and fly up, drawing in more speculators”. Looking at the view of Michael Purves of Tallbacken Capital back in June, we see he held that “Bitcoin’s broader picture is bearish, and perhaps our $15K target is not bearish enough”.
One thing to bear in mind about Dogecoin in particular is that it was created to function as a currency, rather than a trading instrument, and that it offers relatively low transfer costs. This might be a factor that could help it along in times ahead. Before trading on the price of DOGE and other cryptocurrency trading instruments, check out iFOREX’s educational resources library for an insightful look into all that makes crypto tick.