Bitcoin [BTC] and Dogecoin [DOGE] have long been closely correlated in market cycles, with Bitcoin often leading and influencing Dogecoin's price movements.
However, despite Bitcoin recently soaring above $100,000, Dogecoin has failed to keep pace, dropping below the critical support level of $0.40.
The divergence between the two popular cryptocurrencies is growing, raising important questions about the future dynamics of their relationship and whether Dogecoin can regain upward momentum. Dogecoin has underperformed against the backdrop of Bitcoin's surge.
Despite Bitcoin regaining its upward trajectory, rising 7.5% and breaking above $100,000, Dogecoin's price movements present a stark contrast.
Despite reaching a 2024 high of $0.45 on December 8 (a level not seen since 2021), the meme coin has failed to maintain its upward momentum, consistently facing resistance at this level. This resistance level has proven crucial, marking the third significant resistance point in the current market cycle.
As of the time of writing, Dogecoin is trading at $0.3997, and its volume trends indicate that momentum is weakening, with buying pressure reduced compared to early December. Meanwhile, the RSI has dropped to the neutral zone at 51.16, reflecting a decline in bullish strength.
The lack of correlation between Dogecoin and Bitcoin's rise highlights the concerns of traders regarding the divergence. With OBV stagnating around $161 billion, the market indicates a stagnation in capital inflows, raising doubts about Dogecoin's ability to regain upward momentum.
Is there a possibility for DOGE ATH in this cycle?
The historical high of $0.73 that Dogecoin reached during the cryptocurrency bull market in May 2021 remains a distant target. While there is a possibility of surpassing this price in the current cycle, the road ahead is fraught with challenges, especially as Dogecoin moves contrary to the ongoing upward trend of Bitcoin.
The general view is that a recovery for Dogecoin is possible, but it requires a catalyst. Historically, significant price fluctuations in Dogecoin have been driven by sudden surges in retail interest, often triggered by social media trends or rumors, such as potential use cases for payments on X.
For Dogecoin to surpass its historic high from 2021, it will need a wave of similar retail enthusiasm, accompanied by substantial trading volume and renewed participation from both retail and institutional investors.
A more realistic scenario is that a new all-time high could be achieved in early 2025, depending on broader macroeconomic changes. This could include political changes, such as Donald Trump's inauguration, which might reignite optimism in the cryptocurrency space and provide a potential catalyst for a price rebound in Dogecoin.
Potential catalysts for DOGE's decline
Several key factors could lead to further price declines. A major risk is the increasing decoupling from Bitcoin's price movements. As Bitcoin breaks the $100,000 barrier, Dogecoin's failure to maintain similar growth has raised concerns about a potential shift in investor sentiment.
In late November, the Federal Reserve's interest rate decision and ongoing inflationary pressures continued to weigh on risk assets like cryptocurrencies.
Tightening monetary policy or persistent inflation concerns could lead investors to lose interest in speculative assets, impacting Dogecoin and other altcoins.
In addition, the market sentiment around meme coins and speculative investments is very unstable.
The loss of retail interest (often caused by changes in social media trends or regulatory scrutiny) could trigger a sharp decline in stock prices.
As global regulatory uncertainty intensifies, with more countries considering stricter controls on cryptocurrencies, Dogecoin could be adversely affected, leading to a decline in its market capitalization.
