The capital markets have endured quite a bit of turbulence during the past couple of months. Through the market close on April 4, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have declined by 10%, 14%, and 19%, respectively, so far this year. The primary culprits are rooted in emotional reactions to new tariff policies and how they could affect the broader macroeconomy.
Generally speaking, when investors flee the stock market they may begin to look at alternative investments such as commodities (like gold) or even cryptocurrency. For the past several months, one cryptocurrency that has increasingly landed on investor radars in Dogecoin (CRYPTO: DOGE).
Let’s explore what’s been driving the newfound interest in Dogecoin in the first place, and what some recent commentary from Tesla Chief Executive Officer Elon Musk says about whether now is a good time to invest in the popular cryptocurrency.
The chart below illustrates Dogecoin’s price changes during the past year. Between January and October 2024, the price of Dogecoin meandered lower. However, a surge started in November, and Dogecoin’s price rose nearly fivefold by December.
Dogecoin’s price increase late last year coincided with the presidential re-election of Donald Trump. Now, you may be wondering why Trump’s return to the White House sparked an abnormally intense optimism about Dogecoin. After all, what does one thing have to do with the other?
While campaigning, Trump consistently said that he was concerned about the federal budget and rising U.S. debt levels. These talking points resonated with Musk, so much so that the serial entrepreneur emerged as a leading Trump surrogate and began spending quite a bit of time with the GOP nominee. In the final stages of the campaign, Musk and Trump began promoting the idea of creating a new program that would be focused on identifying wasteful federal spending.
The name of this initiative? The Department of Government Efficiency, or DOGE.
Indeed, Trump emerged victorious on Nov. 5 and subsequently the price of Dogecoin went to the moon for a brief period. Below, I’ll dig deeper into what fueled the excitement around Dogecoin and explore why I think its ongoing sell-off will continue.
As is the case with many meme coins, Dogecoin’s rising price isn’t actually rooted in anything concrete about the cryptocurrency itself. Rather, online pumpers created a hype narrative that Musk’s leadership at DOGE may somehow lead to something positive for Dogecoin. While this idea may seem completely farfetched, it actually (sort of) had some merit. Bear in mind that Musk himself has vocally expressed interest in Dogecoin in the past — but has always done so in jest.
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