Dogecoin Nosedives, Erases Double-Digit Muskmania Price Surge

Dogecoin, the world's largest meme coin, erased most of its gains Tuesday night, a day after it soared by more than a third of its value, and outperformed other cryptocurrencies, following Elon Musk's deal with Twitter to buy and take the company private.

The price gyrations for Musk's favorite crypto started when it spiked Monday and jumped as much as 34% to $0.1675, based on CoinMarketCap data, following the announcement that the Tesla CEO now owns the micro-blogging site. The excitement was promptly dubbed Muskmania.

But the euphoria was not to be sustained -- the event ultimately ended up as as a buy-the-rumor, sell-the-news one for the dog-themed meme coin.

In crypto trading, buy-the-rumor, sell-the-news happens when a cryptocurrency gets widely talked about based on positive rumors; however, by the time the event takes place, traders are already burned out, the price is high and the market is loaded with people waiting to sell the news.

DOGE declined a bit on Monday night and then reclaimed most of its gains on Tuesday, rising up to $0.1647. The bullishness was infective, pushing up other cryptocurrencies as well. Bitcoin traded up 3.6% at $40,541.15, Ethereum was also up 4.71% at $3,001.77 and DOGE's rival Shiba Inu was up 3.89% at $0.00002426.

But DOGE started to plummet soon after, touching a 24-hour low of $0.1363 Tuesday night, a steep fall of 17%. Some analysts say the meme coin could be facing interim selloff risks after its massive gains on a bearish event — Musk's Twitter acquisition.

Many investors think that Musk's Twitter buy is good news for cryptocurrency holders, citing the billionaire's fondness for digital tokens, particularly Dogecoin. The world's richest person has been endorsing the dog-themed meme coin and has been instrumental in its price uptrend over time.

Musk's iconic company Tesla now accepts DOGE as payment for its merchandize and Musk has said holders could soon use the token to purchase the electric vehicles it makes, although there is no definitive date yet, except sometime this year. Dogecoin co-creator Billy Markus earlier floated several ideas on how DOGE could add more utility, which involves "businesses accepting Doge," believing that "the more it can be used as a currency, the better," and using the meme coin as a tipping currency.

Dogecoin was trading down 10.32% at $0.1406, with a 24-hour volume of $4,156,628,207, as of 12:41 a.m. ET on Wednesday, based on the data from CoinMarketCap.