The ongoing public conflict between Elon Musk and Donald Trump has left Dogecoin vulnerable to significant price declines.
As the feud between Musk, the vocal Dogecoin supporter, and Trump intensifies, DOGE has dropped by 7% in the past 24 hours, and analysts are warning of a potential 66% drop if the bearish trend continues.
As of June 6, Dogecoin's price stood at $0.17, down from a high of $0.18 earlier in the week. The cryptocurrency has been experiencing consistent bearish movement, with a 14% drop over the past week, marking a 28% decline over the last three weeks. This price drop is linked to the escalating public feud between Musk and Trump, which has added fuel to the ongoing market volatility.
The feud gained traction on June 5, after Musk’s departure from the Department of Government Efficiency (DOGE) led to a heated exchange of words between the two. Trump threatened to terminate Musk’s government subsidies and contracts, which Musk quickly retaliated against on X (formerly Twitter), accusing Trump of needing his support to win the 2024 election. The feud reached a boiling point when Musk dubbed Trump’s recent spending bill the “Big Ugly Bill,” while supporting calls for Trump’s impeachment.
Musk, who has long been associated with the rise of Dogecoin, has played a significant role in the coin’s price movements in the past, often using social media endorsements and Tesla's partial adoption of DOGE for payments. However, as his conflict with Trump deepens, the fear of reduced backing from Musk is starting to weigh heavily on Dogecoin’s price, with some analysts predicting further declines.
Dogecoin’s Price Action: Bearish Indicators Intensify
The technical outlook for DOGE is concerning, with the cryptocurrency confirming a bear flag pattern on its weekly chart. This chart pattern typically signals a continuation of the downward trend, suggesting further selling pressure in the near term.
Dogecoin's price dropped below the $0.20 level, marking the lower boundary of the flag, and it is now testing a crucial support level around $0.15, which also coincides with the 100-week simple moving average. If this support level fails to hold, the next line of defense comes at $0.14, where the 200-day SMA currently sits.
Key support levels to watch include the April 7 low at $0.13, which could come into play if the selling pressure accelerates. If the price breaks below these levels, a further sell-off could be triggered, pushing Dogecoin toward the technical target of $0.06, marking a 66% drop from its current position.
Market Sentiment and Sell-Off Risks
The broader market has also felt the impact of the Trump-Musk feud. Crypto markets, in general, have been under pressure due to global macroeconomic factors, and this latest conflict has added a layer of uncertainty. As Musk’s influence over Dogecoin appears to weaken amid his fallout with Trump, investors have become more cautious, and speculative interest in the token has waned.
The relative strength index, which measures the speed and change of price movements, currently sits below the midline at 43. This indicates increasing bearish momentum and suggests there is still room for further declines before the coin reaches oversold conditions.
While there is a possibility of a technical correction if Dogecoin hits lower support levels, the RSI’s movement suggests that a deeper sell-off is possible if market sentiment remains negative and trading volumes increase. Moreover, with Dogecoin trading well below its 20-day EMA at $0.20, the price could face further resistance at this level, complicating any potential upward momentum in the short term.
Dogecoin’s Role in the Broader Context
As one of the most well-known meme coins, Dogecoin has long been a subject of intense speculation. Initially created as a joke, it has gained significant following due to its affinity with high-profile figures like Musk, who helped propel it into the spotlight. The coin's trajectory has largely been driven by social media hype and speculative trading rather than inherent utility, which makes it highly susceptible to market volatility and public sentiment shifts.
The recent sell-off also reflects broader concerns about the speculative nature of meme coins. Despite Dogecoin's popularity, its long-term value proposition remains unclear, and its price movements are often more influenced by market sentiment and influential figures than any fundamental growth in the blockchain ecosystem.
Musk’s involvement with Dogecoin has been a double-edged sword. On one hand, his tweets and endorsement have significantly boosted Dogecoin’s price, attracting a vast retail investor base. On the other hand, his personal influence has exposed Dogecoin to the whims of his public persona, making the asset vulnerable to market whiplash whenever his relationship with political figures like Trump becomes strained.
The recent drop in Dogecoin's price is largely attributed to the fears of a reduced backing from Musk, especially as his public influence and support for the coin appear to be in jeopardy. The ongoing feud with Trump has only amplified these concerns, leaving many investors questioning whether the meme coin can continue its upward trajectory without Musk's involvement.
Potential for a Recovery or Further Decline
While Dogecoin is undoubtedly facing significant headwinds, the potential for a recovery exists if market sentiment shifts in favor of the cryptocurrency. If Musk’s relationship with Trump settles, or if new catalysts emerge for Dogecoin, the coin could experience a rebound. However, given the current bearish technical indicators and market uncertainty, the risks of further declines to the $0.06 mark are substantial.
Dogecoin’s ability to recover largely depends on the broader market sentiment and the re-establishment of positive news surrounding the coin. If Musk continues to back Dogecoin or if other developments within the cryptocurrency ecosystem offer new growth avenues, Dogecoin may see renewed interest. However, until then, its price movements will likely remain volatile, driven by both market forces and public sentiment.
The technical indicators suggest a significant downside risk, with potential for a 66% drop to $0.06 if the selling pressure intensifies. However, Dogecoin’s journey has never been predictable, and if market sentiment shifts, it could still see a recovery.