What happened
Today’s been a very volatile one for meme token Dogecoin (CRYPTO:DOGE). In Asian trading hours, Dogecoin fell off a cliff, dropping nearly 5% in the span of just more than an hour, around 3 a.m. ET. Since then, this token has recovered most of its losses, currently trading down only 0.4% as of 2:50 p.m. ET.
Dogecoin has once again gained speculative momentum over the past week, surging on news that Tesla CEO Elon Musk tweeted, once again, about Dogecoin. This time, the so-called “Dogemaster” would be allowing Dogecoin to be used for Tesla merchandise purchases on the company website. However, since that tweet, Dogecoin has fallen back to roughly the same levels it was trading at pre-tweet.
Image source: Getty Images.
So what
For meme cryptos such as Dogecoin, a surge in news flow, or a lack thereof, can make or break this token’s near-term returns. Of late, Dogecoin investors have benefited from (often brief) rallies related to some speculative catalyst such as the above-mentioned tweet from Musk. However, a lack of news flow on this dog-inspired token recently has led to most of the gains investors have seen dissipating in short order.
Whether sustained momentum can be maintained for Dogecoin, or any other highly speculative token, right now remains to be seen. The macro environment appears to be a more hawkish one, with easy money policies being pushed aside in favor of higher interest rates. Less risk capital flowing in the market could spell continued selling pressure for more speculative assets, at least over the near term.
Now what
Investors in Dogecoin, or any other meme token, ought to be aware of the risks of being invested in these assets right now. Sure, another parabolic run could take place. As we saw in 2021, anything is possible.
However, the balance of probabilities right now points to a more difficult near-term outlook for Dogecoin and its pup-inspired peers. It’s possible Dogecoin could get another Musk tweet tomorrow and surge on the news. However, it’s also possible we may hear no news for some time, and investors banking on a catalyst could be left holding the bag. Time will tell.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.