On Monday, April 4th, 2022, Tesla CEO and Dogecoin proponent Elon Musk scooped up 73,486,938 shares of social media giant Twitter in a $2.89 billion deal. The move entitled him to a whopping 9.2 percent stake in the company. It also catapulted him to the top of the stakeholder leader board, even overtaking Twitter co-founder Jack Dorsey. This is as per an official filing by the SEC.

Musk is not only an ardent supporter of cryptocurrencies but is also known to use Twitter as a platform to express his views on the same. In fact, his posts have often swung the prices of some cryptocurrencies by large margins. Along with his investment, Musk has also officially joined Twitter’s Board of Directors. However, according to the agreement, Musk cannot further his stake beyond 14.9 percent.

Musk’s investment has also had a ripple effect on Dogecoin, a meme coin that he backs vehemently. Dogecoin has been dragging a ‘falling wedge’ pattern on the price charts since May 2021. This pattern (refer to the figure below) builds when the underlying asset prepares for another bull run.

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Musk’s investment came just in time to kick off a trend reversal for Doge. It could also unlock the potential for the meme coin to leapfrog back to its price of $0.37, which was observed in June 2021. That’s ~130 percent above the current price of $0.163.

When a falling wedge shows a trend reversal (breaks above the upper trend line as shown below), it typically bolts to bridge the gap to the point from where the descent started. In this case, it is $0.3765.

Image Source: TradingView

The Tesla honcho had earlier announced that the electric car maker would accept payments in Dogecoin at its charging stations and for its merchandise. As the single largest stakeholder in Twitter, Musk might just have cleared his way for aggressively promoting the cryptocurrency he loves so much. However, all of this is mere speculation.

“It’s wishful thinking on the part of those invested in dogecoin,” said Bob laccino, Chief Strategist for Path Trading Partners and Co-portfolio Manager at Stock Think Tank in an interview with Cointelegraph. “If anything, his position on Twitter’s board makes it harder for him to use Twitter (if we were to assume he was deliberately using Twitter for this purpose) to pump the price of anything at all. He is in much more specific danger of regulatory action if he does that,” he went on to state.

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Moreover, a bullish sign may not necessarily materialise into a bull run; it may further consolidate and wait for another breakout. In the case of Dogecoin, a bullish setup is not being backed by robust volumes, as is visible at the bottom of the chart. This indicates that investors are not yet convinced of its potential to earn them significant returns.

Cointelegraph reports that Doge needs to surpass two crucial support levels to sustain a rally:

1. The 20-day Exponential Moving Average (EMA), and

2. The 50-day EMA.

The green and red lines represent the 20-day EMA and 50-day EMA, respectively.

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The 20-day EMA is pegged at $0.15, which has already been crossed today, as the price of Doge Coins touched $0.16. This price level has been observed on the charts for the first time in over two months.

The 50-day EMA that stands at $0.17 also looks achievable as the meme coin shows an upsurge for the second day in a row.

Image Source: TradingView

At the time of writing, Dogecoin was trading at $0.1652, up by 8.66 percent over the last 24 hours, according to CoinMarketCap data. Its market capitalisation has also risen by 8.66 percent to $21.9 billion. Its 24-hour trading volume has exploded by 135 percent to touch $6 billion.

It is important to note that Dogecoin was born as a meme coin and has absolutely no fundamentals to back it as a currency. All major price movements have historically been stimulated by Elon Musk’s tweets, which investors should be mindful of.

(Edited by : Priyanka Deshpande)

First Published:Apr 6, 2022 3:26 PM IST