In addition to the scrutiny faced by Elon Musk regarding allegations of market manipulation, ZachXBT, a crypto researcher, has revealed 11 wallets associated with Murad Mahmudov, a well-known memecoin supporter on X (previously known as Twitter), holding more than $24 million in memecoins.
This development sheds light on the ongoing discussion surrounding memecoins in the cryptocurrency sphere, assessing their ability to attract new investors alongside the risks associated with them.
Reflecting on the 2021 Market Cycle
Back in April 2019, when Elon Musk initially mentioned Dogecoin, it was valued at a mere $0.003, with a market capitalization of only $300 million.
However, his endorsement led to a remarkable surge in the memecoin’s value, propelling it to an all-time high of $0.73 in May 2021. Currently, DOGE remains the largest memecoin in the market, boasting a market cap exceeding $15 billion.
The impact of Musk’s influence is evident in the significant influx of market participants, as demonstrated in the chart above. Moreover, there was a notable uptick in trading activity on exchanges following his tweet.
Despite some traders capitalizing on his support to secure profits, others likely suffered losses when DOGE retraced to $0.164 precisely a month after reaching its all-time high. This heightened volatility led to numerous traders opting to exit the market.
Almost four years have elapsed since DOGE hit its peak, and since then, the coin has experienced a bearish trend. Despite Musk’s ongoing endorsement, DOGE has struggled to replicate its previous rally, currently trading at $0.107.
In essence, the market demonstrates apprehension when a small number of wallets amass a significant quantity of memecoins, especially considering their high volatility and susceptibility to sudden price fluctuations.
Influence on Memecoins’ Price Movements
As previously mentioned, memecoins are heavily influenced by community support, with notable figures impacting their price movements significantly.
While Musk’s support initially led to DOGE experiencing a massive price surge – a phenomenon it has not duplicated since – additional bullish indicators like a MACD crossover and a rising RSI also bolstered this upward momentum, hinting at potential overheating in the market.
While his endorsement was a pivotal moment, other influencers advocating for memecoins on their social media platforms can also drive short-term price spikes.
Nevertheless, these communities are not the sole drivers of the memecoin ecosystem, as other investors make decisions based on various metrics.
Any discrepancies could disrupt the expected trajectory, particularly for swing traders aiming to maximize returns in a condensed timeframe.
Therefore, maintaining vigilance over other factors is crucial when investing in memecoins. Despite drawing parallels to the 2021 market cycle, confirming a full-scale trend reversal in light of the emerging data remains a challenging task.
Yet, short-term positions may remain particularly exposed to such endorsements.