The price of Dogecoin (DOGE) rose by about 25% on December 20 as Tesla CEO Elon Musk once again highlighted the feme-inspired cryptocurrency.
Elon Musk and his enthusiasm for Dogecoin is a long-standing feme. Every so often, Musk likes to tweet about Bitcoin (BTC) and the crypto market. When it does, the market responds to it quite aggressively.
Musk last tweeted about Dogecoin in July 2020, when he said he predicted “the standard future of Dogecoin.” At the time, DOGE was rallying 14%.
The reason behind the Dogecoin uprising when Musk tweets is quite simple. As a Hasu cryptocurrency researcher he explains, “Prices in this space are fueling attention.” Therefore, when there is a significant increase in coverage, low market cap cryptocurrency can increase rapidly.
Dogecoin trending on Twitter
On December 20, Musk started tweeting about Bitcoin, posting several tweets about the dominant cryptocurrency.
Bitcoin is my safe word
– Elon Musk (@elonmusk) December 20, 2020
In the middle of it, Musk tweeted “One word: Doge,” which caused a frenzy on Twitter. Dogecoin started trending on the platform, especially as Musk changed his bio to “Former CEO of Dogecoin.”
According to data from CoinMarketCap, Dogecoin has a market capitalization of about $ 549 million. Compared to major cryptocurrencies, such as Bitcoin, Ether (ETH) and highest decentralized finance tokens (DeFi), DOGE’s valuation is significantly lower.
Furthermore, because DOGE is only the 44th largest cryptocurrency in the world, its volume and liquidity are lower than the highest cryptocurrencies.
As such, when an influential figure, like Musk, speaks for DOGE, the cryptocurrency often surges as the trading activity rises sharply.
November saw a similar trend to other large altcoins. For example, as Cointelegraph reported, XRP surged tremendously as Bitcoin began to rally toward $ 19,000. On Coinbase, it surpassed $ 0.90 while hitting about $ 0.75 on other major exchanges.
What does DOGE’s surge indicate?
Technical analysts and traders note that DOGE’s rise has led to the beginning of altcoin cycles in the past. A nickname trader called “Crypto Capo” He said:
“Every altseason starts with $ DOGE pumping.”
The likelihood of an altcoin season emerging remains high because Bitcoin is facing major resistance at $ 25,000 based on exchange order book data.
The trader also noted that Bitcoin would likely hit $ 25,000 first, drop to $ 21,000 to claim back support, and make its run toward $ 30,000. The trader He said:
“Possible road map for $ BTC – $ 25k, then $ 21k-22k, then $ 30k Dips for purchase.”
If a scenario like this occurs, the biggest beneficiary would likely be altcoins. Traders would try to play higher-risk plays to compensate for the declining volatility in the Bitcoin market.
The combination of these factors suggests that the DOGE rally could mark the start of a new altcoin cycle in the foreseeable future.