Dogecoin, Elon Musk’s ‘favorite’ cryptocurrency: How much did it increase in value and why?

On April 3, Elon Musk He did another of his own: he changed the Twitter logo to that of the cryptocurrency Dogecoincausing its market value to rise by 20% that same day from US$0.079 to US$0.096.

Since the change of logo of Twitterthe capitalization or total value (price of a cryptocurrency multiplied by the amount of assets available on the market) of Dogecoin reached US$13,560 million, placing it in position number eight in terms of crypto market capitalization, explained María Fernanda Juppet, CEO of CryptoMarket.

As reported by the newspaper El País, from hours before the logo change on April 3, until 7 pm on Tuesday, April 4, the volume of transactions exceeded US$5,000 million.

Juppet commented that it was, but it was a one-off move. The price of Dogecoin it has gone lower and returned to US$0.08.

César Romero, Head of Research at Renta4 SAB, agrees with Juppet that this has been a one-off movement, however, he stresses that it is necessary not to lose sight of the fact that this is a digital currency with high volatility.

The relationship of Elon Musk and Dogecoin

Elon Musk, On December 20, 2020, he posted a tweet saying, “One word: Doge,” shooting up the value by 30%. Because of this, Musk was sued in June 2022 by investors in Dogecoin, requesting US $ 258,000 million for creating a pyramid scheme to trigger the digital currency. According to Reuters, the billionaire requested on April 1, 2023 that this accusation be dismissed.

A year later, in May 2021, Musk appeared on the Saturday Night Live show commenting on it and that same week he announced by Twitter that SpaceX would launch a satellite called Doge-1 and it would be a first space mission financed by Dogecoin.

On December 14, 2021, the millionaire reported that Tesla would begin to accept the Dogecoin as a form of payment for some of the company’s products. After the tweet, the value of the cryptocurrency increased by 24%.

Is this Elon Musk strategy positive or not?

For CryptoMarket’s Juppet, the problem is that this is not the first time Elon Musk has been associated with Dogecoin. In addition, it must be considered that Musk is now running Twitter and is one of the most followed people on social media. For the executive, Musk must be aware that any mention of Dogecoin it generates movements in the market that, in addition, benefit it economically.

“By making interventions of these characteristics in a company in which he has a direct interest, Musk causes artificial changes in the market, which do not reflect a real interest in the acquisition of the crypto asset. In this way, the change of logo of Twitter causes increased demand for Dogecoin based solely on speculation, that is, it opens spaces for investors with large amounts of this cryptocurrency They can increase their profits by selling to non-expert investors, who suffer significant damage when asset prices adjust.Juppet explained.

Romero, from Renta4 SAB, for his part, considered that this type of strategy generates greater speculation with the value, a harmful scenario for investors. , he sentenced.

Carlos Bernos, Country Manager for Peru at Buda.com, explained that there are cryptocurrencies, such as Bitcoin, that are not tied to a person’s actions, while others are. An example of them is the Dogecoin with Elon Musk, because there is some expectation that it will be officially linked with Twitter. Therefore, he stressed that it is necessary to see these types of strategies and proposals independently and review the ‘whitepaper’ (a technical document that details the proposal of your project) of the cryptocurrencies in which you want to invest.

“In the case of Dogecoin, since its inception this cryptocurrency has been considered a “meme”. In fact, its own founders classified it as such, and created it as a mockery of cryptocurrencies. Over time, the community began to buy it, and its peak of popularity was reached when Elon Musk decided to become part of that community, ”he explained.

Consequences

Strategies like the one applied by Elon Musk with the Dogecoin They can bring with them two negative aspects, explains María Fernanda Juppet, CEO of CryptoMarket.

• 1. Increased volatility: The massive speculation with Dogecoin may cause an increase in the volatility of the value of the cryptocurrency and affect the market as a whole. This makes it more difficult for investors to know when is the best time to buy or sell, because they will have to be at the mercy of information or comments that cause changes in the market, instead of being governed by supply and demand.
• 2. Loss of confidence in cryptocurrencies: If the massive speculation with Dogecoin causes great losses for people, this can harm the crypto ecosystem in general. This can cause investors to end up moving away from cryptocurrencies.