The DogeFather: Case Study on Elon Musk Dogecoin Price Correlation

• According to research, tweets by Elon Musk related to Dogecoin have pumped the price.

• Elon Musk holds an unconfirmed balance of over $3 billion in Dogecoin.

Dogecoin has vexed many in the crypto space.

When Jackson Palmer and Billy Markus created Dogecoin, they didn't think a coin based on the popular Shiba Inu meme would ever be taken seriously. But as the community around it gradually grew increasingly bullish, global interest in the crypto coin surged.

The token’s price saw an exponential spike in 2021, which may have been linked to Elon Musk. Correlation isn’t causation, but this might be the exception considering the sheer influence of Elon Musk.

The Dogecoin price has strongly correlated with Elon Musk’s statements and tweets. The billionaire has shared his love for DOGE on Twitter for a while.

For example, Musk tweeted on June 19, 2022:

Although most cryptocurrencies are closely tied to Bitcoin's price movement, we can observe Dogecoin's price bucking the trend and responding to Elon Musk’s support.

When Musk tweeted about Dogecoin on January 28, 2021, it caused people's interest to spike and the price of the crypto subsequently shot up. The graph below shows when the tweet pumped Dogecoin’s price to new levels:

However, note that this pump was also propagated by Wall Street Bets, the notorious subreddit that lent its support to meme stocks like Gamestop. Musk was also responsible for pumping DOGE’s price by 20% with a three-word tweet:

Another tweet in July 2020 sent the currency’s price soaring 14%. Since the crypto market (and Dogecoin especially) lacks mainstream adoption and utility, price movements can often be triggered through external factors.

The Blockchain Research Lab published a research paper in 2021 that highlighted four different instances where Elon Musk caused a price surge by tweeting about DOGE.

The trend of Musk’s tweets on Dogecoin correlating to the coin's price action has been observed throughout 2021. While the price was affected the majority of the time, there were some instances when there wasn't above-average price movement in the short or long term following Musk's statement. 

Let's consider a price movement of 10% after Musk's tweets about Dogecoin as a significant indicator of correlation with the DOGE price. Out of 13 times that Elon Musk tweeted about Dogecoin in 2021, there were only three instances where the price of DOGE didn't move significantly in the following 24 hours.

Out of the ten times when the DOGE price moved following Musk's tweet, the price moved positively seven times and negatively the other three times. For example, Musk hosted a poll on his Twitter asking if Tesla should accept Doge payments, and the price dipped nearly 20% in 36 hours.

Considering the outliers, there was an observable correlation between DOGE price and Musk's tweets more than 75% of the time in 2021. This illustrates a clear picture of the effect Elon Musk’s tweets have on DOGE's price.

The SNL fiasco

Dogecoin supposedly lost its ‘Musk factor’ when the billionaire was invited to the iconic sketch television show Saturday Night Live. Elon’s appearance on SNL was expected to be a major event for the price and adoption of Dogecoin.

However, the outcome wasn't as expected. The episode that Elon Musk hosted was aired on the 8th of May, 2021. This was also the day when DOGE hit its last all-time high, and it tumbled more than 90%. This unprecedented fall came when the 'Dogecoin army' suspected its price would shoot past $1 and “to the moon.”

The relief rally

Dogecoin saw a 100% relief surge amidst the crypto bear market. This uptrend came soon after the news of Elon’s latest acquisition broke on the internet. The billionaire inked a deal to take over Twitter for $44 billion, and the meme coin that previously traded at around $0.06 soon saw a steep rise to $0.12.

Binance reportedly invested $500 million in the acquisition deal, which signals increased blockchain and crypto influence over Twitter. Tech detective Jane Wong tweeted that the company had plans to add a crypto wallet on the platform.

Twitter Blue introduced NFTs as profile pictures, which shows how Twitter is gradually moving toward web3. It was also reported that the social media platform will be making an attempt to restore freedom of speech, which indicates a similar anti-censorship sentiment that's pervasive in the crypto world.

After Musk changed his Twitter bio to “Chief Twit,” he revealed his designs to make Twitter an “everything app” or super app, meaning one that provides a variety of features in one place, such as messaging, social media, payments, and e-commerce—similar to China's WeChat. Digital payments are expected to start with crypto and expand to fiat payments later.

Although Elon has been endorsing cryptocurrencies, especially DOGE and Bitcoin, his own holdings still remain a mystery to the outside world. It's expected that Elon holds a sizeable investment in the coin. While crypto wallets are pseudonymous, some Reddit users claim to have identified a wallet address that belongs to Musk.

The internet sleuths used Musk’s tweet about his donation to GiveDirectly to look back at the balance of the wallet that made the transaction. The community speculated that the wallet with an outgoing $150,000 transaction was owned by Elon Musk. However, that wallet has since been emptied, and it’s unconfirmed who has access to this wallet.

People also suspect a wallet that previously held 36 billion DOGE to possibly be Musk's. If this wallet is indeed his, that would mean he’s the holder of over $3 billion in DOGE.

The Tesla CEO has been vocal and transparent about the firm's crypto holdings. The company admitted to buying bitcoins worth $1.5 billion through SEC filings. Tesla also announced that it would soon accept Bitcoin as a payment for its cars. The company’s Q2 earnings report revealed that it had sold 75% of its bitcoin holdings, but Musk stated that the company hadn’t sold any Dogecoin.

The SpaceX CEO tweeted that he’ll be launching a satellite named Doge-1 into space. The mission will be paid for in Dogecoin, which will (kinda) make DOGE the first crypto in space—literally to the moon. The mission is set to take place in early 2023, but the question is, “Why Doge?”

Let’s take a look at the factors why the DogeFather loves the doge-themed currency so much.

• He does it for the meme. Elon is quite the meme junky on Twitter, and his DOGE support is crucial to his internet persona.
• There's a significant community of diehard Dogecoin fans, and Musk is the highest-profile member of the Dogecoin community.
• Elon believes that DOGE can be used as a medium of payment in the near future. This idea of Doge payments was also endorsed by Mark Cuban.
• It’s less damaging to the environment than other major cryptos. TRG data centers found out that XRP is the most environmentally friendly currency, followed by DOGE. Here's a breakdown of how many kilowatt-hours are consumed per transaction by blockchain:

• Elon is also working with Dogecoin developers to turn it into a much more sustainable mode of payment.

Elon Musk was revealed to be the catalyst for some of DOGE's largest price movements, but there’s a lot more to the currency than a pump-and-dump scheme. Dogecoin has value because it's a widely adopted asset that's much faster, greener, and cheaper to transact than other popular cryptocurrencies.

Tesla already supports buying merch and other goods at the Tesla shop using Dogecoin. It's expected that other brands will follow suit once adoption advances.

The inclusion of Dogecoin into pop culture by other celebrities like Mark Cuban and Snoop Dogg has also helped prop up the crypto's price. Mark Cuban showed interest in making the currency a mode of payment for the merch and tickets of his NBA franchise, the Dallas Mavericks.

DOGE is currently ranked 8th by total value and has a strong reputation thanks to celebrity endorsements. This popularity means Dogecoin is available to trade on popular exchanges like Kraken and Robinhood. If an investor wishes to hold custody of the private keys of his wallet, it's recommended to use a hardware wallet.

Decentralized exchanges lack an essential step in the investor journey: on-ramping. Reputable centralized exchanges like Kraken and Public let you buy stablecoins or other cryptos. Signing up for these platforms is an easy way to invest in DOGE and hundred of other cryptos.

Dogecoin price prediction

The best way to predict what the price of DOGE will look like is to look at the following factors:

• Crypto market cap
• Doge’s supply
• Rate of adoption
• Whales
• Inflation

Value drives adoption, and DOGE's future looks much more bullish on this front. Musk and Cuban are already working on making Dogecoin a medium of payment. Meanwhile, DOGE has a cult-like following, and Dogecoin market sentiment has managed to remain positive amidst the bear market, and the search trends are still healthy.

The factors that are problematic in terms of Dogecoin’s price are the supply and the whales. Inflation causes the supply to increase, thus pushing against demand and bringing down the price year-on-year.

Only 679 wallets hold over 81% of the DOGE supply worth over $11.8 billion. This means there's a chance a small group of DOGE holders could easily manipulate the market. Considering the bullish and bearish market sentiments, we can predict that Dogecoin might see healthy growth reaching over $0.35 in 2023, and we might see the meme token go as high as $0.6 in 2025.