Elon Musk's Dogecoin Plans Could Be Disastrous for the Cryptocurrency

If Elon Musk goes ahead with his plans to add Dogecoin payments to Twitter, the independent market analyst will short the cryptocurrency even more.

It is unlikely that Dogecoin (DOGE) will continue to surge in value in the coming weeks, despite hopes that Elon Musk would integrate the token onto the Twitter platform. This is according to one popular market analyst, who argues that the token's potential for further growth is low.

Dogecoin prices are crashing, but is the market really in trouble?

I believe that the recent price reaction to a Musk tweet is indicative of a top in the market for DOGE. The coin formed a local top at $0.158 on Nov. 1, the same day that Musk shared a picture of his pet Shiba Inu wearing a t-shirt with the Twitter logo. I believe that this is a sign that the market is overreacting to Musk's involvement and that the price will soon correct lower.

It's possible that the so-called "Musk effect" is wearing off when it comes to Dogecoin's potential integration into Twitter. According to GCR, this means that most of the potential gains from such a move are already priced into the coin's value. Therefore, if and when the integration actually happens, it could end up being a "sell the news" event.

The market is correcting itself after a period of being overbought.

The popular cryptocurrency Dogecoin has seen a correction in recent days, after reaching a high of $0.158 just a few days ago. This move is likely due to profit taking by investors, as Dogecoin has seen a significant increase in value in recent weeks.

It's been a tough week for DOGE holders, as the price of the token has dropped sharply following rumors that Twitter is pausing its crypto wallet development project. This has resulted in a nearly 27% correction from the Nov. 1 local top, and DOGE is currently trading at around $0.115. While it's always disappointing to see prices fall, it's important to remember that the crypto markets are still highly volatile and prone to sudden swings.

The recent downside move in the markets can be attributed to its extremely overbought conditions, with the highest relative strength index (RSI) since April 2021. This indicates that the market is due for a correction and that investors should be cautious in the near-term.

DOGE/USD three-day price chart. Source; TradingView
The DOGE/USD three-day price chart is looking promising, with a steady uptrend over the past few days.

The recent correction in the price of Dogecoin has prompted the coin to retest its support levels from December 2021 to May 2022. The coin may reach a level of $0.185, which is coinciding with its 0.236 Fib line. If the recovery occurs, this may be a good time to buy back into the coin.

If the price of DOGE falls below the $0.108-$0.124 range, it could drop to $0.055 as the primary downside target. This would represent a decline of 55% from the current price levels.

DOGE On-Chain Data Shows Promise for Future Growth

There is no doubt that Dogecoin has been under pressure in recent months, with key metrics consistently declining. However, things may be about to turn around for the popular cryptocurrency.

The Shiba Inu price has dropped to a record low against Dogecoin, raising concerns that history may repeat itself with a 150% rally.

It is clear that the whales have had a significant impact on the price of Dogecoin in the past, but it remains to be seen whether they will continue to do so in the future.

Dogecoin whale transaction count. Source: Santiment
Dogecoin whale transaction count is on the rise, suggesting that major investors are bullish on the cryptocurrency.

There is a growing disparity in the distribution of Dogecoin tokens across addresses. Those holding between 1,000 and 10 million tokens have seen their supply fall alongside the price, while those holding more than 10 million have seen a modest increase. This trend is likely to continue as the price of Dogecoin remains volatile.

Dogecoin supply distribution. Source: Santiment
The distribution of Dogecoin supply is quite interesting. According to Santiment, there are a total of 100 billion Dogecoins in circulation.

It's encouraging to see that even though whales have been selling pressure, retail investors have been offsetting their selling pressure to some degree. This indicates that there is still some confidence in the DOGE currency. Hopefully this trend will continue and we will see an increase in the value of DOGE.