Musk stirs up Dogecoin market sentiment again

On December 14, Tesla founder Elon Musk tweeted that the electric car maker will accept Dogecoin (DOGE) as a payment method for some products on a test basis. As soon as the tweet came out, DOGE rose 46.6%, becoming a "green spot" in the "red forest" of the crypto asset market.

The "Godfather" who stirred up the Dogecoin market is back.

People have dubbed Musk the "Godfather of Dogecoin". This year alone, the founder of Tesla has used his personal remarks to increase the price of DogeCoin, which was created as a joke seven years ago, from a few cents to more than 140 times. As a result, a Meme coin sector has been formed in the currency market. Copycat Dogecoins with various animal concepts have appeared in the market in super large quantities, pushing up speculative sentiment of taking a small risk for a big gain.

This time, the news that Tesla accepts Dogecoin as payment for some of its products once again drove DOGE up, once again proving the emotional market characteristics of Meme coins. How long can the news-driven gains last?

Tesla to accept Dogecoin as payment for some products

"Tesla will offer some items for purchase through Doge and see how it goes." On December 14, Tesla founder Elon Musk tweeted about DOGE's use case dynamics.

As soon as the tweet came out, DOGE rose against the trend against the backdrop of an overall decline in the crypto asset market, rising from around $0.15 to $0.22 at one point, a 46.6% increase in 2 hours, before falling back to around $0.19 in the next 4 hours.

Musk said some Tesla products will support Dogecoin payments

Musk did not specify what goods can be purchased with Dogecoin. Looking at the Tesla brand, the prices of its peripheral products range from $50 to $1,900, including clothing, belts, and mini models of Tesla vehicles. Not long ago, on December 10, after the release of the new Cybertruck model, the peripheral Cyberwhistle (Tesla whistle) was also launched based on it, priced at $50.

It is not yet known whether these Tesla peripherals support Dogecoin payments, but Musk, who has more than 66 million Twitter followers, is well known for his ability to shout orders.

According to Coingecko data, Musk's tweets about Dogecoin, including his tweet calling Dogecoin "the people's cryptocurrency", have helped the crypto asset soar 14,406% in the past year. You should know that Dogecoin was only $0.0047 at the beginning of the year. In May of this year, the month when Musk called the most intensive crypto assets, Dogecoin reached an all-time high of $0.6818, but fell to a low of $0.1728 in the following two months, a drop of 74.6% from the historical high.

Dogecoin was first created as a joke by programmers Billy Marcus and Jackson Palmer in 2013. In order to satirize the crazy rise of Bitcoin, they created an unlimited supply of Dogecoin, which became the earliest Meme coin. Because it is cheap and easy to mine on computers, it is mined and held by many cryptocurrency enthusiasts. It was originally used for rewards and has a strong grassroots nature.

It can be said that until this year, Dogecoin successfully went viral due to Musk’s personal preference. Not only that, his Shiba Inu pet and its name have become the reason for some Meme coins to appear in the crypto market, such as Shiba Inu and Floki Inu. These Dogecoin knockoffs have attracted a large number of retail investors due to their huge circulation and low prices, and the speculative sentiment is strong. The high market fluctuations of these Meme coins have also continuously punctured the bubble.

Memecoin market still dominated by sentiment

Tesla's acceptance of Dogecoin payments is still at the stage of Musk's tweets. You know, the founder once said that "Tesla accepts Bitcoin payments" less than two months later, but then he changed his mind, believing that "Bitcoin is not a good substitute for transaction currency."

In May this year, Musk conducted a poll on Twitter, asking users whether they wanted Tesla to accept Dogecoin. Later, he said on a TV show that Dogecoin was a "market noise."

The founder of the world's largest electric car maker has even begun to affect the market with his fluctuating sentiments towards crypto assets. After Musk later said that Tesla would not accept Bitcoin payments, Bitcoin began to dive from its first all-time high this year. Since then, Musk has also been blacklisted by some crypto enthusiasts.

The news that Tesla accepts Dogecoin as payment for some of its products has once again driven up the price of Dogecoin, once again proving the sentimental market characteristics of some crypto assets, especially Meme coins.

Some cryptocurrency investors say Dogecoin is a phenomenon similar to "meme stocks" such as GameStop and AMC and should not be taken seriously. Brad Garlinghouse, CEO of cryptocurrency company Ripple, bluntly stated that he does not believe Dogecoin is good for the crypto asset market.

DOGE’s market volatility this year

"Meme coins such as Dogecoin are speculative assets, and sentiment is often one of the most important price drivers for this broad category of assets." Crypto asset analyst Chris McDonald wrote that investors in meme coins seem to be more focused on a key driver, namely Internet search volume. The previous price surge of Dogecoin coincided with a sharp surge in the search volume of meme coins, and its recent price drop was also a manifestation of a decline in search interest.

In addition, some investors are increasingly focusing on the fundamentals of crypto assets such as Dogecoin. Compared with other large blockchain networks, these tokens have little utility, but traders have been looking for ways to rationalize their valuations. "This weekend, one indicator that investors seem to be focusing on is the ratio of the token's mining revenue to its market value," said McDonald. Dogecoin's parabolic rise this year did occur with the increase in mining activity, "but perhaps this is just correlation rather than causation."

MacDonald believes that with declining interest in the meme coin (as evidenced by its declining search volume) and the gradual fading of speculative enthusiasm in the crypto industry, "the possibility of Dogecoin going to the moon does not seem likely."