Elon Musk causes another Dogecoin pump: Should you buy DOGE?

Written by: Ilija Rankovic
February 4, 2021
  • Dogecoin soared to $0.6 after Elon Musk's Twitter endorsment.
  • DOGE is currently dumping after the hype-caused pump.
  • The cryptocurrency has strong resistance sitting at $0.04.

Dogecoin (DOGE) has experienced yet another price surge as the CEO of Tesla and SpaceX, Elon Musk, posted a tweet praising the cryptocurrency. Should you buy DOGE right now, wait a bit, or skip on it entirely?

Fundamental analysis: just another Dogecoin hype pump (and dump)

Meme-based cryptocurrency Dogecoin had quite a wild price movement as various players enter the market. Its price surged in recent hours as the world’s richest man, Elon Musk, endorsed it. DOGE’s price shot up instantly, briefly posting gains of 50% and a record price of $0.0599.

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Musk, who is well-known for name dropping both Dogecoin and Bitcoin on Twitter, stated that he was taking a break from all of it “for a while,” returned to post a symbolic picture of a rocket and the moon. “Doge,” he added in a comment that followed, with the later tweet reading “Ur welcome.” His last tweet’s image was Dogecoin’s Shiba Inu mascot posing as Simba in Disney’s film, “The Lion King.”

Dogecoin’s overall outlook depends entirely on the hype created around it, and isn’t based on any fundamental or technical factor at the moment.

DOGE has posted weekly gains of 292.63%, beating BTC‘s 16.72% and ETH‘s 21.44% gains by a large margin, respectively. Dogecoin is currently trading for $0.05, and takes up the 12th place in the market cap top20 cryptocurrencies. The project currently boasts a value of $6.43 billion.

DOGE/USD technical analysis: DOGE pump reaches the $0.6 mark before dumping

Dogecoin has left the sideways trading action on 3 February, and started to slowly move up. Musk’s tweet further enhanced the push and pumped the price, making it reach close to its all-time highs. However, as the bulls reached exhaustion, the price started to drop, and DOGE will most likely fall below the 38.2% Fib retracement level it is currently testing.

DOGE has decent support around the 50% Fib retracement level of $0.04, as well as the 61.8% Fib retracement level of $0.033.

DOGE/USD 4-hour chart
DOGE/USD 4-hour chart

DOGE’s RSI on the daily time-frame has briefly entered the overbought territory, but is currently just under it. Its value is sitting at 69.01.

DOGE/USD 1-hour chart
DOGE/USD 1-hour chart

DOGE’s hourly time-frame shows exactly how Elon Musk’s tweet caused a massive spike of Dogecoin buyers to step into the market. The price shot up to as high as $0.6 before dropping down. However, DOGE is still keeping some of its gains as it holds above the $38.2% Fib retracement level of $0.483.

The drastic drop in volume post-Musk’s tweet is surely a discouraging indicator for DOGE buyers, as it will eventually lead to its price dropping to previous levels, or somewhere around them.