Is Elon Musk backed Dogecoin Bubble about to burst?

05/01/2021

After Elon Musk rocket lifted Dogecoin with generous tweets and flattering notes of support on numerous occasions, it became a widely accepted payment instrument – from the Dallas Mavericks to America’s oldest wine seller. Furthermore, the demand for DOGE expanded outside the US as well. Latvia’s largest air carrier, AirBaltic, enabled its customers to make bookings with it.

Several analysts and traders are of the opinion that Dogecoin’s price trend in 2021 mimics that of Bitcoin. However, others still view it as a bubble that is about to burst.

As major altcoins improved value behind Bitcoin and Ethereum, the DOGE was not far behind. This digital asset which managed to register a market capitalization of $34.10 billion even got ranked as the seventh-largest cryptocurrency on CoinMarketCap.

At this time, DOGE boasted of a 450% increase since the start of the year, and was trading at $0.2733. Year-to-date gains for Dogecoin come to over +6,000%, making it significantly more profitable than Bitcoin, which is up a comparatively 88%+ over the same period.

Alleged Market Manipulation Explains DOGE Performance

Given Dogecoin’s lack of fundamentals, its ascent attributes primarily to Elon Musk and clever market manipulation by whales. Musk has put on a pro-Dogecoin front for the longest time, even earning himself the title Dogecoin CEO. But this year has seen an uptick in his efforts to promote the project.

  • Generally, the value of cryptocurrencies depends on how rare to find it is, and bitcoin being the scarcest cryptocurrency, has the highest value amongst all. Dogecoin has an unlimited supply, and therefore, how can a currency with such an unlimited supply ever have any value (and that too spike by more than 800% in just 24 hours on Jan 29) just after Elon Musk tweeted about Dogecoin.
  • While major third-generation blockchains, of the likes of Algorand, Tezos, Cardano, and F2, all have large teams, capital behind them, and most of all accountability. But Dogecoin has none of these things.
  • There is no original technology to DOGE, it’s a copy of Bitcoin. If a major flaw is discovered, there will be no one who’s committed to find a way to fix it. Maybe a volunteer, but there’s no guarantee.

The last thing crypto needs is further scrutiny from regulators. But the DOGE situation seems like this will be unavoidable. The price of DOGE is not sustainable, it’s likely to collapse and massive amounts of retail money is going to be lost very quickly.

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