Due to a significant decline in open interest and failure to hold key support levels, Dogecoin faces stagnation.
The significant decline in Dogecoin's open interest reflects a decrease in trader optimism and market activity.
The recent drop in price to $0.32 has raised concerns about DOGE's short-term recovery prospects.
In April of this year, Dogecoin's (DOGE) open interest surged significantly, reaching an annual peak of $12 billion. However, by October, this figure had sharply declined. Although there was a brief rebound at the beginning of the month, open interest is now nearing its lowest level since November 10. This recent downturn closely resembles Dogecoin's 20% price drop over the past week, leading many investors to worry about Dogecoin's short-term outlook.
So, what does this market volatility really mean? Changes in market sentiment often herald new opportunities and challenges. In light of the current situation, steadfast supporters of Dogecoin may need to reevaluate their investment strategies and explore the underlying reasons. Perhaps this is a time for reflection or an excellent opportunity to adjust investment portfolios.
Dogecoin's open interest has significantly declined.
Recently, Dogecoin's open interest has plummeted significantly, now down to just $1.42 billion. Surprisingly, this is a stark contrast compared to the $12 billion peak in April! Given that Dogecoin's price had once dropped to $0.32, this ongoing decline reflects traders' pessimistic sentiment.
This bearish trend in open interest typically indicates that market confidence in a short-term price rebound is gradually diminishing.
Additionally, with Dogecoin's (DOGE) price having dropped 20% over the past week, the reduction in open interest indicates that traders are very cautious when opening new positions. Unless market sentiment changes, further pullbacks may occur.
MDIA signals suggest market sentiment is stagnant and cautious.
MDIA indicates that Dogecoin holders are increasingly inclined to hold rather than trade their assets.
Recently, the MDIA index has garnered widespread attention. This index is used to track the average holding duration of currencies on the blockchain weighted by purchase price. Surprisingly, this value has steadily risen to 335 days! This phenomenon reflects a key trend: long-term holders do not seem to be actively participating in trading or reallocating assets. In other words, the market is currently in a 'hibernation' state.
Historically, increases in MDIA have often been associated with reduced liquidity and declining demand, generally seen as a bearish signal.
If this upward trend continues, it indicates a lack of new capital injection and speculative activity in the Dogecoin market, aligning with the recent price drop of Dogecoin. This also reinforces the view that cautious sentiment dominates Dogecoin's short-term outlook.
Due to bearish momentum dominating, Dogecoin struggles below key support levels.
From the daily chart perspective, Dogecoin is attempting to reclaim key support levels after a recent decline.
Its price has dropped below the $0.35 mark, which was previously an important support level, indicating that the bearish trend still dominates.
The MACD indicator further confirms this bearish trend. At the time of writing, the MACD line is in the negative range, reflecting downward price momentum. The histogram indicates that bearish pressure is gradually weakening; however, before a clear bullish crossover appears, the hope for Dogecoin's recovery remains quite bleak.
Recently, Dogecoin's price movement has indeed been concerning. If the current bearish trend continues, we may soon see Dogecoin testing the $0.27 support level. However, the market is ever-changing; if buyers can rally and push the price above $0.35 while maintaining an upward trend, Dogecoin could potentially rebound and challenge the $0.48 resistance area.
This potential recovery trend relies on an increase in trading volume and new buying power, but currently, both aspects are quite lackluster.
Can DOGE spark a rebound like it did in 2021?
Perhaps due to its close association with Elon Musk and rumors of his role in the Donald Trump administration, Dogecoin's price soared after the U.S. presidential election.
Its price surged significantly by over 200%, reaching $0.485 on December 8.
However, after achieving such a noticeable increase, the DOGE price has pulled back but remains above the $0.4 mark.
But last week the situation changed abruptly, leading to a market-wide collapse that sharply drove down its price. In just a few days, DOGE's price plummeted nearly 40%, falling to $0.26.
Despite how alarming such significant price adjustments may sound, such occurrences are not uncommon in the cryptocurrency market, especially in the highly volatile meme coin sector.
Similar sharp fluctuations have occurred in the past, and in fact, this may indicate greater growth potential for DOGE in the future.
Comparing the recent market crash to the 2017 and 2021 bull market cycles, during those periods, the most representative meme coins experienced triple-digit surges followed by a pullback of 40-60%, and at the end of their respective market trends, they achieved four-digit or even five-digit spikes.
Can DOGE soar above $10?
An increase of 5000% or even 12000% sounds incredibly exciting, but we still need to treat such predictions with a more pragmatic attitude.
Looking back at 2017 and 2021, when DOGE's price movements were relatively stable, in such cases, achieving such a massive increase theoretically seems somewhat easier.
If this veteran meme coin were to rise by similar percentages from now on, its price and market cap would certainly soar.
For example, if the increase reaches 5000%, its price would exceed $13, and its market cap would surpass $1.9 trillion, which would be higher than Bitcoin's current market cap.
If DOGE replicates the surge of 2021, its price could soar to $31-$32, with a market cap exceeding $4.5 trillion, larger than Apple's market cap.
While these numbers may seem unrealistic at first glance, and past history cannot fully predict future price trends, this does not mean DOGE has peaked in this cycle.
Dogecoin is currently still a distance away from its historic peak set in 2021, and many other assets have successfully surpassed their peaks, so DOGE may still possess considerable growth potential.
Currently, the market situation for Dogecoin is quite unstable, and its ability to return to its peak in the future remains uncertain. For fans of this 'meme coin', it's time to carefully consider their investment strategies! Should they jump in decisively or wait patiently? It all depends on how you interpret market signals. Dogecoin's journey has just begun, let's look forward to it together!
