When Billy Markus and Jackson Palmer created Dogecoin as a joke, little did they know that this meme coin would become one of the most coveted cryptocurrencies in the world. Moreover, who knew that it would be frequently endorsed by one of the most prominent personalities in the world, and one of the richest men on earth, Elon Musk.

Yes, we all know, and we all have seen how Elon Musk has been a huge proponent of the meme token and how every time, a simple tweet causes Doge prices to react quite violently. How does this correlation between Elon Musk and Dogecoin work? And what lies ahead in the future for Doge? Let’s delve into it right away!

Elon Musk and his Doge obsession

Dogecoin was inspired by a meme on the internet back in 2013 and the two software developers built this coin as a joke. However, at the time of writing, that meme-inspired token holds the 8th position among the top cryptocurrencies in the market, with a market cap of around $9.6 billion.

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However, one of the main reasons for the enormous popularity of Dogecoin is because of Elon Musk and his immense influential presence on social media. Musk has supported Dogecoin for a while and has been upfront and vocal about it. And it seems like every time he says something about the meme coin, its price tends to react almost immediately.

Research proves correlation

A research paper published in 2021 by the Blockchain Research Lab looked into the instances when Elon’s tweets caused DOGE prices to surge drastically. It was found that nearly 75 percent of the time, Elon’s tweets had a positive impact on Dogecoin price movements. The most prominent example is when Musk influenced Doge prices back in December 2020. A simple three-word Twitter post from the SpaceX owner sent the token rallying. “One Word: Doge,” was the content of the post that sent the meme coin shooting 25 percent!

With good sometimes comes bad

The report also showed that the remaining 25 percent of Musk’s tweets had a negative impact on Dogecoin’s price action. For instance, on December 19, Musk created a Twitter Poll asking audiences if he should step down as the CEO of the microblogging website. “Should I step down as head of Twitter? I will abide by the results of this poll,” read Musk’s tweet.

Surprisingly, a majority of users, 57.5 percent of them, to be precise, said yes. This development was quickly followed by a price drop for Doge. The meme coin lost 11 percent of its value following the result of the poll.

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Elon, his Doge possessions, and the dangers of his DOGE obsession

Although Elon Musk has been one of the most prominent supporters of Dogecoin, it is still unclear how much of the cryptocurrency he owns. People on the internet suspected that a wallet that supposedly contained 36 billion Dogecoins was Elon’s. If that were true, he could be sitting on $3 billion worth of DOGE now.

However, Musk had been quite transparent about his investments in Bitcoin, somewhere around $1.5 billion as per his SEC filings. The Q2 report also showed that his car company Tesla had sold 75 percent of the Bitcoins, but he did not mention anything about selling Doge, which adds to the mystery.

However, some experts have maintained that the spike in Dogecoin prices following Elon Musk’s tweets are hasty decisions at best. Some even view this as something potent enough to cause a dangerous polarizing effect in financial markets. Elon’s brand value pervades the Web3 space and any industry he focuses on. However, those who are inexperienced in Web3 may get influenced by false optimism.

Moreover, it has been proved that Musk can influence the price of Dogecoin with a mere tweet. This is a concerning pattern, considering that cryptocurrencies were designed to be decentralised and away from the influence of centralised entities.

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Another concerning issue is that almost 81 percent of DOGE is held up only across a few hundred wallets, around $11.8 billion worth of DOGE in 679 wallets to be precise. This indicates that a small but wealthy majority of token holders can manipulate the market if they so desire. Then there’s musk, who can influence prices without any known Doge holdings whatsoever.

And finally, such a strong correlation could also mean that any negative developments surrounding Elon Musk could also cause Doge to dip. For instance, earlier this month, the meme coin dipped 8 percent when Musk lost his title as the world’s richest person. Such a correlation can be detrimental to a crypto project.

Can this spell danger for Dogecoin?

Doge’s future does not look bleak given the current circumstances. The token has a cult following and of course, Elon Musk himself is ever ready to back the project up. Moreover, billionaire Mark Cuban has also shown his interest in the token in making Dogecoin a viable mode of payment. Finally, market sentiments around Doge have been on the positive side even in such depressing market conditions. However, despite all this and Musk’s tweets, Dogecoin is currently trading at $0.07337, down 90 percent from its all-time high of $0.73 in May 2021.

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