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The cryptocurrency market witnessed significant volatility this week, with Dogecoin (DOGE) experiencing a sharp decline after reaching a three-year high. The meme-based cryptocurrency, often influenced by social media and high-profile endorsements, saw its value drop more than 60% on March 5, 2024, erasing most of its gains for the month. The price tumbled to a daily low near $0.128 before recovering slightly.
At press time, however, the bearish hand still had the upper hand despite bulls finding support at the intra-day low of $0.1471. Trading at $0.1532, DOGE is down 9.53% from the intra-day high, reflecting the strengthening bearish trend.
DOGE/USD 24-hour price chart (source: CoinMarketCap)
This recent price movement comes amid news of a lawsuit against Elon Musk, a vocal supporter of Dogecoin and other cryptocurrencies. Musk's influence on the market has been notable, with his comments and actions often leading to immediate price changes for DOGE and other digital currencies. The lawsuit, filed by four former Twitter executives demanding $128 million in severance from Musk, has led to speculation about its impact on Dogecoin's valuation.
Elon Musk's legal challenges have historically correlated with Dogecoin price fluctuations. Past lawsuits, such as the "Funding secured" legal battle in August 2018, resulted in an over 18% drop in DOGE's value. However, not all legal proceedings have led to significant market reactions, demonstrating the complexity of factors influencing investor sentiment and cryptocurrency valuations.
The most recent lawsuit involving Musk and former Twitter executives has reignited discussions about his potential influence on Dogecoin's market performance. While direct evidence linking Musk's legal troubles to DOGE's price movements is lacking, the speculative nature of cryptocurrency markets means that investor perception can lead to rapid sell-offs or buying frenzies, as reflected by the recent whale activities.
Traders and analysts are closely monitoring the situation, with some speculating that Musk may need to liquidate assets, including his Dogecoin holdings, to cover legal expenses.
Following the dramatic drop, Dogecoin's price began to recover on March 6, rallying 20% to a daily high near $0.18. This recovery, while significant, faced resistance at the $0.18 mark, indicating potential profit-taking by investors looking to capitalize on the volatility. The recovery's sustainability remains uncertain, with market analysts divided on the future direction of Dogecoin's price.
However, the role of market sentiment in driving Dogecoin's valuation cannot be overstated. High-profile endorsements and social media trends have historically played a pivotal role in shaping DOGE's market performance.
On the DOGE/USD 4-hour price chart, the Moving Average Convergence Divergence (MACD) rating of 0.0024 and movement south of its signal line indicate that the negative trend is strengthening. This shift implies that selling pressure intensifies, potentially leading to additional price drops soon.
The histogram trend in the negative region reinforces the bearish momentum, indicating a drop in buying activity and the possibility of further downward movement in the DOGE/USD pair.
DOGE/USD 4-hour price chart (source: TradingView)
However, the Stochastic RSI trend in the oversold region, with a rating of 15.97, suggests that the market is nearing a potential reversal point, as the oversold conditions may cause a temporary price rise. This could provide a purchasing opportunity for traders seeking to profit from a short-term price increase.
