Elon Musk's DOGE Task Force Could Be the Catalyst for Dogecoin's Next Crash

So far in 2025, the stock market has been a mixed bag. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have all exhibited higher than usual levels of volatility.

So far in 2025, the stock market has been a mixed bag. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have all exhibited higher than usual levels of volatility. Between mixed economic data and ongoing tariff negotiations with trade partners, there is a lot of uncertainty surrounding the equity markets.

During times like these, it's not unusual for investors to sell their stocks and redeploy capital into alternatives such as commodities, real estate, or even cryptocurrency. Over the last year, one cryptocurrency that has seen quite a bit of action is Dogecoin (DOGE -4.30%).

While Dogecoin's momentum can be tempting to follow, I think its price could be headed to new lows sooner rather than later. Let's explore Dogecoin's price action over the last several months and try to uncover what's been driving interest in this specific cryptocurrency. From there, I'll detail why I think Dogecoin could be headed for a precipitous sell-off.

Taking a closer look at the Dogecoin roller coaster

The chart below illustrates Dogecoin's price action over the last 12 months. Although its price is up 37% over the last year, recent trends clearly show that Dogecoin is trading well below prior highs.

Dogecoin Price data by YCharts

What may have caused the rapid ascent and descent of Dogecoin

Does anything stick out to you as it relates to the timing of Dogecoin's rise and its more recent sell-off?

Per the graph above, Dogecoin experienced an unprecedented rally in November. But why? In my opinion, I think Dogecoin's parabolic rise was correlated with the outcome of the presidential election.

Following Donald Trump's reelection in November, he created a new task force called the Department of Government Efficiency (DOGE). Moreover, Tesla CEO Elon Musk was nominated to lead this initiative.

In years past, Musk has demonstrated some support for Dogecoin -- albeit in joking and facetious ways (like referring to himself as "The Dogefather" on an episode of Saturday Night Live). Nevertheless, it's my thinking that some investors began creating a narrative that the acronym for the Department of Government Efficiency, coupled with Musk's involvement, would somehow result in an endorsement for Dogecoin. In some ways, I can understand how an investor would connect these dots.

However, in truly ironic fashion, I think Dogecoin's sell-off in recent months also revolves around Musk.

During an interview a couple of months ago, Musk explained that the U.S. government does not have any plans to use Dogecoin.

Image source: Getty Images.

Is Dogecoin a buy right now?

If you think about the big picture, most (if not all) of Dogecoin's price action over the last year has been rooted in narratives as opposed to any fundamental truths. Unlike Bitcoin or Ethereum, Dogecoin doesn't have much in the way of utility. It is a meme coin and shouldn't be taken too seriously.

While it's entirely possible it could experience a rally here and there, historical trends suggest these rises are often fleeting. As a long-term investor, I'm not interested in getting caught up in a momentum trade and being left holding the bag.

With Musk telling investors that his time at DOGE will reduce significantly over the coming months, I think the narrative that Dogecoin will somehow benefit from him leading DOGE's efforts will fade. Given its high degree of speculation and Musk throwing water on the idea that the government may leverage Dogecoin in some capacity, my prediction is that Dogecoin will lose whatever support it has left and crater to new lows by the end of the year.

For these reasons, I would pass on Dogecoin and avoid investing in the cryptocurrency.