Dogecoin whipsawed over the weekend, with the meme cryptocurrency meeting resistance at $0.20 and failing to stay above that. Why is DOGE still dropping? Is it smart to buy the cryptocurrency now at its low?
Dogecoin is almost 75 percent below its 52-week high, while Bitcoin is 50 percent below its peak. Cryptocurrencies have been volatile in 2021, even by their standards.
Why is Dogecoin still dropping?
A major part of Dogecoin's drop has been the crackdown on cryptocurrencies—it's taken a toll on crypto assets, and DOGE is no exception. Furthermore, meme assets haven't seen the same buying support as other digital assets amid the crash.
While “diamond hands” and “HODLers” can hold onto their assets despite the crash, this cannot support prices. Also, given the crash in Dogecoin, its community seems less able to influence others to buy the meme coin. Crowd buying is a key driver of meme assets.
Musk seems to have lost his influence on DOGE
With this weaker crowd buying, Elon Musk’s ability to pump up Dogecoin has also come down. While he has tweeted in support of DOGE several times, he hasn’t yet allowed it as a payment for Tesla cars. That move seems unlikely now that Dogecoin's volatility is to a degree where it could quickly wipe out the company’s profitability.
Dogecoin co-founder Jackson Palmer
On Jul. 14, Dogecoin co-founder Jackson Palmer lambasted cryptocurrencies and repeated that he would never return to them. He also said that “the cryptocurrency industry is controlled by a powerful cartel” of wealthy individuals.
In an apparent swipe at Musk, Palmer talked about “billionaires manipulating markets.” He also tweeted, “But these days even the most modest critique of cryptocurrency will draw smears from the powerful figures in control of the industry and the ire of retail investors.” This has been a sad reality—those who have rightly warned of a bubble and an impending crash have been scoffed at.
Is it smart to buy Dogecoin now?
Usually, big drawdowns in fundamentally strong stocks are a good buying opportunity. However, that's not the case with Dogecoin, a joke coin with no real-world value.
Dogecoin's price prediction
Dogecoin's charts don't look any better. It has fallen below its 200-day simple moving average and hasn’t been able to stay above it—a "sell" sign. Its moving average convergence divergence also suggests "sell." DOGE's only saving grace may be its 14-day relative strength index score, which implies the meme coin is nearing oversold territory.
Overall, buying Dogecoin now doesn't look like a smart move. Ultimately, as is the case with meme stocks such as AMC Entertainment, the greater fool theory seems to be playing out.