Is Dogecoin Experiencing a Repeat of Late 2020?
Dogecoin's recent price movement is eerily similar to what happened in late 2020, when it jumped out of a bear market and surged over 1,000% by early 2021.
According to Dow Theory, which suggests market trends tend to repeat (or at least rhyme, as Mark Twain put it), traders often look to the past to guess future price moves.
Recently, Dogecoin, the most popular meme cryptocurrency, has crossed above its 50, 100, and 200-week simple moving averages (SMAs), leaving behind a long 20-month period of low prices. The move of the 50-week SMA above the 100-week SMA is a bullish sign.
This situation mirrors late 2020's setup, right before Dogecoin's massive rally in the first five months of 2021, suggesting a potential upward trend.
After spending 20 months in a bear market with prices between 5 and 15 cents, Dogecoin finally broke out. A similar period of low activity in 2019-2020 led to a huge spike in 2021, with prices soaring 3,600% to 37 cents by May.
If history repeats, Dogecoin might be gearing up for another big rise. However, Dogecoin's history shows that while its price spikes are dramatic, they typically don't last more than six months, followed by a long period of falling and stabilizing prices that could last nearly three years.
Another point that connects the current situation to 2020 is the expectation that major central banks, including the Federal Reserve, will cut interest rates soon. This anticipation of easier money policies is usually a positive signal for riskier assets. Back in 2020, similar conditions saw central banks keeping rates very low.
