Last year, mainstream cryptocurrencies such as Bitcoin and Ethereum generated returns far superior to those seen in the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) . One of the main catalysts for these cryptocurrencies in 2024 was the presidential election. Then-candidate Donald Trump and many of his supporters consistently touted the benefits of cryptocurrency, and even hinted at building a strategic reserve of Bitcoin for the U.S. balance sheet.
Just to paint a picture of how much the election weighed on the crypto market, consider that the prices of Bitcoin and Ethereum rose 37% and 40%, respectively, between Election Day (Nov. 5) and Dec. 31.
And yet one crypto that trounced these behemoths was, of all things, Dogecoin (CRYPTO: DOGE) . Despite its lack of utility compared to Bitcoin and Ethereum, the election results actually served as an ironic tailwind for Dogecoin's gains as well. It saw its price soar by 98% between Election Day and the end of the year.
Nevertheless, Dogecoin's price has been in a downward spiral since the new year. Below, I'll detail what really caused Dogecoin's price to rise in 2024, and explore whether now is an opportunity to buy the dip.
Why did the price of Dogecoin rise in the first place?
The chart below depicts Dogecoin's price action over the last year.
Between January and October 2024, Dogecoin's price barely managed to hover above $0.01. In other words, it was pretty much worthless. That seems appropriate, as Dogecoin has almost no utility as a form of payment in the real world.
But notice how its price suddenly spiked around November. What happened? Well, the obvious thing to note is that Trump emerged victorious and was officially named president-elect. While I understand why some cryptocurrencies such as Bitcoin and Ethereum started rising significantly around this time, why did Dogecoin follow suit?
The answer is actually a little complicated. One of President Trump's closest allies on the campaign trail was Tesla CEO Elon Musk. In the months leading up to the election, Musk teased the idea of working with the Trump administration to create a new working group focused on identifying excess government spending in an effort to streamline the federal budget.
The name of this proposed unit was the Department of Government Efficiency (D.O.G.E.). The D.O.G.E. moniker containing the same letters as the Dogecoin ticker symbol is almost certainly not a coincidence, as Musk has jokingly "endorsed" Dogecoin in years past.
The creation of a D.O.G.E. team and Musk's direct involvement in the project fueled a hype-driven narrative that influenced the price of Dogecoin -- a trait that is often seen in meme stocks as well.
Dogecoin is selling off since the election results
Following President Trump's inauguration on Jan. 20, Musk has been fast at work building the D.O.G.E. team. In fact, over the last few weeks, the corporate account for D.O.G.E. has posted numerous times on social media, disclosing to the public what federal contracts are currently being reviewed.
You'd think that these reports and the interest surrounding D.O.G.E. would cause the price of Dogecoin to continue rocketing higher.
However, that is far from the case. Since Election Day, the price of Dogecoin has fallen by 47% from its prior highs.
Should you buy the dip in Dogecoin?
Despite cratering from its highs, the price of Dogecoin is actually still up 56% since Election Day. I think it's highly likely that the price of Dogecoin could continue falling as investors realize that Musk's ambitions to help the Trump administration revise the federal budget are independent of his humorous support of the Dogecoin cryptocurrency.
To me, the sell-off in Dogecoin signals that reality is setting in for those who chased the momentum in November. With that in mind, I do not think now is an opportunity to buy the dip in Dogecoin.
Before you buy stock in Dogecoin, consider this:
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