Within the 24-period main as much as midday ET Monday, widespread meme token Dogecoin ( DOGE -8.31% ) misplaced 6.1% of its worth. That transfer coincided with a drop within the general cryptocurrency market of roughly 5.4%. As such, one would possibly conclude that Dogecoin was transferring in lockstep with its asset class.
Nonetheless, there are some token-specific components that seem like enjoying into Dogecoin’s fairly dismal current value motion.
First, traders seem like specializing in a key driver that has reportedly been among the many highest-correlation catalysts for this token: web search quantity. Dogecoin’s earlier value surges coincided with super spikes in search quantity for the meme token, whereas current declines in its value have adopted dips in search curiosity for it. Typically talking, sentiment performs a serious position in how cryptocurrencies carry out. Nonetheless, broader curiosity in Dogecoin, particularly, seems to stay the important thing driver that merchants are listening to.
Second, some traders are more and more elementary components relating to cryptocurrencies comparable to Dogecoin. The token gives little utility relative to different mega-cap blockchain networks, but merchants have nonetheless been on the lookout for methods to rationalize its valuation. One metric traders seem to have had their eyes on this weekend is the token’s mining-revenue-to-market-capitalization ratio.
Lastly, Elon Musk this month tweeted feedback that appeared supportive of Dogecoin. One such tweet on Dec. 10 in reference to a picture of a Dogecoin-themed Cybertruck famous, “Imbued gold/bronze coloration could be sick.” An earlier tweet that advised Dogecoin might be an answer for traders involved about excessive transaction charges on main crypto networks additionally drew some consideration.
Meme tokens comparable to Dogecoin are speculative property, and for property in that broad class, sentiment is often some of the important value drivers.
With curiosity in that particular token declining (as evidenced by its declining search quantity) and the speculative mania relating to the crypto sector dying down, the percentages do not seem to favor Dogecoin taking a visit to the moon.
Somewhat, there are considerations constructing that this meme coin may as an alternative be headed for the historical past books — an instance of some of the unbelievable speculative bubbles in historical past. That could be a fairly dire view. Nonetheless, it is clear that even with Musk’s supportive tweets and a rising proportion of traders on the lookout for methods to rationalize this token’s valuation, Dogecoin stays beneath stress.
This text represents the opinion of the author, who might disagree with the “official” suggestion place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis – even one in every of our personal – helps us all assume critically about investing and make choices that assist us change into smarter, happier, and richer.