NOIDA (CoinChapter.com) — Dogecoin price declined sharply on March 5, nearly obliterating all its March gains before bulls recovered some ground. The Dogecoin crash saw the price plummet more than 62% on March 5. The price reached a daily low near $0.128 before bulls recovered some ground.
Interestingly, the price drop followed news of a new lawsuit against billionaire Elon Musk, raising the question: Is the Dogefather behind the price drop?
Elon Musk is a known proponent of cryptocurrencies, especially Dogecoin and Bitcoin (BTC). The billionaire CEO’s comments often detect the price action of Dogecoin, so much so that Musk faced a class action lawsuit from investors accusing him of insider trading.
Musk has faced several lawsuits in the last eight years. Some of the more famous ones are in the chart above, and each time, the DOGE price shows a drop. For instance, following the “Funding secured” lawsuits of Aug. 2018, the DOGE price plummeted over 18% weekly.
However, the drop in DOGE prices has not always been very severe. For example, the compensation lawsuit news saw the memecoin drop only 0.5% weekly. Moreover, the lawsuits might not be the only bearish cue for DOGE at the time.
The California Racism lawsuit, which recently received a tentative ruling against Musk, occurred at a time when the DOGE price was in a downtrend. As such, the subsequent drop of 8% in the third week of Feb. 2022 might be more due to market cues than Musk.
Elon Musk Faces $128M Lawsuit from ‘X’ Twitter Employees
Elon Musk’s recent legal woes could have contributed to the recent Dogecoin crash. Four former Twitter executives, including the ex-CEO Parag Agrawal, filed a lawsuit demanding $128 million severance from Musk.
The lawsuit alleged that Musk “made up fake causes” to fire the executives to avoid paying their severances. In Walter Isaacson’s biography of Musk, a passage claims Musk planned to fire Agrawal and others before they could vest their stock options.
Agrawal had his letter of resignation, citing the change of control, ready to send. But when his Twitter email was cut off, it took him a few minutes to get the document into a Gmail message. By that point, he had already been fired by Musk. “He tried to resign,” Musk said. “But we beat him,” Spiro replied.
Excerpt from the book
Will Musk Sell?
Traders might perceive the aforementioned lawsuit as a pressure point that could lead to speculation about Musk liquidating some of his assets, potentially affecting Dogecoin holdings. There has been speculation that Musk is one of the biggest DOGE holders, with 19.9 billion tokens to his name.
While there’s no direct evidence suggesting that Musk would sell his Dogecoin to cover any of the lawsuit’s potential costs, the mere speculation in a market driven by investor sentiment could likely trigger reactive sell-offs.
Dogecoin Bulls Start Recovering Post-Crash
The recovery continued on March 6, with DOGE price rallying 23% to reach a daily high near $0.18. Despite the downtrend, DOGE fans remained bullish on the token’s prospects, with several traders shilling the memecoin.
However, the supply wall near $0.18 repelled the token’s upside move, suggesting that bears are booking profits near that level.
On the other hand, if the Musk lawsuit had no hand in inducing the Dogecoin price crash, the recovery rally might continue, moving above the supply wall near $0.18 to target the resistance near $0.203.
The relative strength index, or RSI, remained overbought despite yesterday’s plunge, scoring 74.53 on the daily charts. RSI is a momentum indicator measuring asset price movements to identify overbought or oversold conditions.
Traders often consider an overbought RSI level a bearish signal since the occurrence usually precedes a bearish reversal or consolidation phase for the underlying token.
Moreover, Dogecoin’s recovery on March 6 has created a divergence from the token’s RSI, revealing a concerning disparity between rising prices and a falling RSI — often a precursor to a market correction.
If the recovery rally breaks down, the DOGE price risks a drop to the support near $0.15. Moreover, breaching the immediate support might result in Dogecoin price testing the support near $0.127 before recovering.
