The Cryptocurrency Crashed: Here’s Dogecoin’s Silver Lining

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Dogecoin (DOGE-USD) was the perfect cryptocurrency for 2021. Traders turned to Dogecoin due to memes, Elon Musk, and a general bullish sentiment for more adventurous assets. Dogecoin doesn’t have much use in the real world. For a moment, it didn’t matter. In a world where the shares of companies such as GameStop (NYSE:EMG), AMC Entertainment (NYSE:CMA) and the like could go into the stratosphere with little fundamental support, Dogecoin had a lot of speculative trading appeal.

This year, however, was a different matter. Meme stocks returned most of their gains. And in crypto, this market has entered a dramatic downturn. Bitcoin (BTC-USD) is struggling to hold the $20,000 level, with its price down more than 60% from its all-time highs. With Bitcoin down by more than half, it’s no surprise that most smaller cryptocurrencies have been beaten in 2022. This has put Dogecoin in a tough spot. There were already few basic reasons to own the coin.

Dogecoin has never been primarily about technology or its development ecosystem, but rather about trading around vibes and social community. These intangible factors are much less attractive during a bear market. And that’s especially true given that the play’s main financial backer, Elon Musk, is currently distracted with other business.

Teleprinter Company Price
DOGE-USD DogecoinUSD $0.054420

The “Dogefather” is busy right now

Many factors have led to the rise of Dogecoin. However, any discussion of Doge’s incredible run must involve Elon Musk. Prior to 2021, the coin typically traded for less than a penny each and it was not near the top of the cryptocurrency charts.

In 2021, however, Musk started tweeting frequently about Dogecoin. This gave the crypto a serious buzz. Eventually, all of this led to a Saturday Night Live appearance where Musk proclaimed himself to be “the Dogefather” and gave the meme token a huge publicity boost. The price of Dogecoin would hit its all-time high of 73 cents in conjunction with this event.

Since then, Dogecoin, like cryptocurrency in general, has generally been on a downward trend. Dogecoin price occasionally jumps on a Musk tweet or other positive catalyst, but has generally slid.

And Musk in particular has been focusing on other things lately. Namely, Musk is busy with a messy takeover bid for Twitter (NYSE:TWTR). Musk initially offered $54.20 per share for Twitter, but now appears to want to lower his offer. He accuses spambots of undermining the value of Twitter’s business. Twitter responded by offering to give Musk access to internal Twitter data, but whether that will satisfy Musk’s concerns remains to be seen.

While it’s unclear how the Twitter drama will unfold, one thing is certain and that is that as long as Musk is primarily focused on Twitter with his businesses, such as You’re here (NASDAQ:TSLA), there is less time for memes. Speaking of Tesla, its shares have also plunged in recent weeks, putting more pressure on Musk.

Potential benefits for Dogecoin

Dogecoin’s lack of technological development, in a sense, could be an advantage for the asset now. This may sound strange, so let me explain.

The cryptocurrency community has been rocked by a series of scandals and crashes in recent weeks. Safemoon (SAFEMOON-USD) has been the subject of legal action, with investors alleging a pump-and-dump scheme and embezzlement. Prominent Safemoon investor Dave Portnoy has also criticized the project managementclaiming that he lost almost all the funds he had invested in Safemoon.

Then there was the shocking collapse of Earth (LUNA USD), Moonand the Anchor (ANC-USD) loan protocol in the last month. That’s not all. Decentralized finance (DeFi) lending platform Celsius plunged as it halted withdrawals amid an apparent liquidity crunch. The related Celsius (CEL-USD) token has lost almost all of its value in recent months.

In this scary backdrop for cryptocurrency, Dogecoin is a familiar commodity. It is a token related to Elon Musk and the love of dogs for people. Dogecoin is not trying to create a DeFi market or become a leading non-fungible token (NFT) platform. There is no stablecoin associated with Dogecoin that could crash overnight.

Dogecoin was originally released in 2013. It has gone through a number of crypto bear markets. The strengths and weaknesses of Dogecoin are well known and this could be comforting in a rapidly changing market.

final verdict

Dogecoin is currently facing a series of headwinds. The crypto is in a big bear market. Dogecoin itself still has minimal real-world utility. And the supply for even assets has largely disappeared this year. Dogecoin itself reflects this. With the price now below 6 cents each, the price of Dogecoin has fallen almost 70% so far in 2022.

Still, Dogecoin has already experienced major downturns. It is possible that this crypto winter will drag on further and the whole space will remain in crisis. But with Dogecoin, at least, there are no stablecoins, withdrawal freezes, or other such liquidity issues to worry about. When sentiment improves, Dogecoin may rally again. Especially once Elon Musk resolves his Twitter transactions, he might start talking about Dogecoin more prominently again.

As of the date of publication, Ian Bezek had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Ian Bezek has written over 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $300 million New York-based hedge fund. You can reach him on Twitter at @irbezek.



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