The price of Dogecoin (DOGE) rose around 25% on December 20, when Elon Musk, CEO of Tesla, again drew attention to the meme-inspired cryptocurrency.
Elon Musk and his enthusiasm for Dogecoin have been a longstanding meme. From time to time, Musk likes to tweet about Bitcoin (BTC) and the crypto market. When it does that, the market reacts quite aggressively.
Musk last tweeted about Dogecoin in July 2020 when he said he foresaw a “Dogecoin standard future”. At this point, DOGE was growing by 14%.
The reason Dogecoin has soared on Musk tweets is pretty simple. As cryptocurrency researcher Hasu explains, “prices in this area are fueled by attention.” Hence, a small capitalization cryptocurrency can grow rapidly if the attention increases significantly.
Dogecoin trend on Twitter
On December 20, Musk began tweeting about Bitcoin and posting multiple tweets about the dominant cryptocurrency.
Bitcoin is my safe word
– Elon Musk (@elonmusk) December 20, 2020
In the middle, Musk tweeted “One word: Doge”, which caused a sensation on Twitter. Dogecoin began to develop on the platform, particularly when Musk changed his biography to “Former CEO of Dogecoin”.
According to data from CoinMarketCap, Dogecoin has a market capitalization of around $ 549 million. Compared to important cryptocurrencies such as Bitcoin, Ether (ETH) and top tokens for decentralized finance (DeFi), DOGE’s rating is much lower.
Since DOGE is only the 44th largest cryptocurrency in the world, its volume and liquidity are lower than the top cryptocurrencies.
Often times, when an influential figure like Musk talks about DOGE, the cryptocurrency rises when trading activity suddenly spikes.
In November, other major altcoins saw a similar trend. For example, as Cointelegraph reported, the XRP spiked as Bitcoin began to rebound to $ 19,000. It topped $ 0.90 on Coinbase while it hit around $ 0.75 on other major exchanges.
What does the increase in DOGE indicate?
Technical analysts and traders point out that DOGE’s rally in the past has led to the start of altcoin cycles. A pseudonymous trader named “Crypto Capo” said:
“Every low season starts pumping $ DOGE.”
The likelihood of an altcoin season starting remains high as Bitcoin faces a major resistance of $ 25,000 based on Orderbook data.
The trader also noted that Bitcoin would likely hit $ 25,000 first, drop to $ 21,000 to regain support, and run to $ 30,000. The dealer said:
“Potential roadmap for $ BTC – $ 25,000, then $ 21,000-22,000, then $ 30,000 dips are up for purchase.”
If a similar scenario occurs, altcoins would likely be the biggest beneficiary. Traders would look for higher risk games to offset the declining volatility in the Bitcoin market.
The combination of these factors suggests that DOGE’s rally could mark the start of a new altcoin cycle in the foreseeable future.