Dogecoin prices rebounded last week but have pared some of the gains. The meme cryptocurrency has been very volatile in 2021, like other digital assets. However, given its “meme status,” DOGE prices tend to be more volatile than other cryptocurrencies. What’s the prediction for dogecoin prices and is it a good investment in 2021? Also, many traders wonder whether the joke cryptocurrency will ever reach $1.
The adoption of digital currencies has been increasing. Several traders see them as an attractive asset class and a portfolio diversifier. However, the diversification argument might not hold as crypto assets have tended to move in tandem with stock markets. For example, cryptocurrencies fell in March 2020 along with stock markets.
Dogecoin technical analysis
Dogecoin made a bullish breakout and moved above the 50-day SMA. The 50-day SMA was a strong resistance for DOGE and it failed to cross above the trendline. It also trades above the 10-day, 20-day, and 30-day SMA. Dogecoin has managed to cross above the 100-day EMA (exponential moving average), which is a bullish indicator. However, Dogecoin still trades below the 100-day SMA.
DOGE has a 14-day RSI (relative strength index) of 60.7, which is getting near overbought levels. RSI values above 70 signal overbought levels, while values below 30 signal oversold positions. Overall, Dogecoin prices are looking bullish on the charts and if it can hold the 50-day SMA, it could move higher.
DOGE price prediction
The technical prediction for Dogecoin prices looks positive. However, from a fundamental perspective, it still has to prove its worth as a store of value like other major cryptocurrencies. Dogecoin is still seen as a “joke” and “meme” by many traders.
Some of the merchants have started to accept Dogecoin as a payment. Many major merchants have to support Dogecoin payments for it to become more mainstream.
DOGE and Elon Musk
Tesla CEO Elon Musk is the biggest backer of Dogecoin. Musk allowed Dogecoin as a payment for his privately-held SpaceX. He even held a Twitter poll on whether Tesla should also accept Dogecoin where most people responded with a "yes." However, Musk hasn’t accepted Dogecoin as payment for Tesla products yet.
If Tesla accepts Dogecoin as a payment, it could be a gamechanger and help lift sentiments. Tesla sold almost half a million cars in 2020 and the deliveries are expected to rise at a CAGR of over 50 percent in the medium term. The company also has solar and energy storage operations.
Tesla posted revenues of $11.9 billion in the second quarter and is expected to post revenues of $50 billion in 2021. Even if some of these sales get shifted to Dogecoin, it will help support DOGE prices. A lot of Tesla car buyers are Musk fans and his extended support for the cryptocurrency could help the crypto's prices.
Will Dogecoin hit $1?
If Tesla does accept Dogecoin, some buyers of Tesla products could make payments in Dogecoin. Asset prices react significantly to Musk's antics since many of Musk’s fans end up buying assets he's even closely associated with.
The high (or the low depending on how you perceive) point came when Musk fans bought the wrong Signal stock when the mercurial Tesla CEO tweeted in support of the Signal app.
Meanwhile, Musk’s support for Dogecoins, a recovery in cryptocurrencies, and the technical uptrend in Dogecoin could help prices move higher. Looking at the volatility in DOGE prices, it wouldn't be surprising to see it hit even $1, which would mean only about a four-fold rise from these levels.
While a four-fold rise might seem high for “traditional assets” it isn't uncommon for cryptocurrencies. Dogecoin itself is up multifold over the last year despite the recent fall and a four-fold rise isn't something that we can rule out. As a boilerplate caution and as highlighted by many “old-timers,” be prepared to lose all your money in the worst-case scenario.