Dogecoin experienced a rebound on Friday, with prices returning above $0.40, ending a week-long consolidation phase.
With Gary Gensler confirming his imminent resignation, traders quickly positioned themselves with leveraged long positions worth $355 million, pushing DOGE's price 3% above the volume-weighted average price (VWAP), indicating a potential new breakout brewing.
Previously, Dogecoin's price had declined 13% from last week's high, but it broke through $0.40 again on Friday. Data from the derivatives market shows that this surge is directly related to Gensler’s departure news.
Market Reacts Swiftly to Gensler's Departure, Dogecoin Reclaims $0.40 Level
It is worth noting that Elon Musk recently participated in the government efficiency department (DOGE) initiative proposed by the Trump administration, which also contributed to Dogecoin reaching a three-year high on November 12.
However, traders later took profits, and DOGE entered a 10-day consolidation period.
From the charts, DOGE's price increased by 185% from November 5 to November 12, followed by a 13% drop over the next ten days.
On November 21, DOGE opened at $0.38, down 13% from the three-year high of $0.44 announced by Trump on November 12.
However, on Thursday, it was reported that Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), will resign on January 20.
This news has sparked a positive reaction in the cryptocurrency community, with widespread belief that the strict investigations and lawsuits targeting multiple crypto companies and prominent figures may come to an end.
Within 24 hours of the news release, the global cryptocurrency market briefly surpassed $3.25 trillion, setting a new historical high, with mainstream coins including Dogecoin, XRP, and Cardano experiencing double-digit gains. As of November 22, when this article was written, DOGE had surpassed $0.42, with a 13% increase in the past 24 hours.
As market sentiment improves, bulls are also beginning to increase their long positions, seizing opportunities.
Notably, Dogecoin broke through the key resistance level of $0.40 on Friday, with bullish investors dominating the derivatives market. The leverage trading volume of Dogecoin futures contracts significantly surpassed that of the shorts, which typically indicates a potential substantial price increase.
The Coinglass liquidation chart below shows the real-time balance of long and short leveraged contracts surrounding the current ADA price.
On Friday, Dogecoin (DOGE) had long leveraged positions totaling $355.5 million, while short contracts amounted to $162.6 million. The long positions exceeded the shorts by approximately $192.9 million, an increase of 118.7%. This indicates that Dogecoin bulls hold a clear dominant position in the derivatives market.
When long leveraged positions far exceed shorts, two key bullish signals typically occur:
Market Confidence Boost: As long positions increase, traders' optimism about Dogecoin's short-term price movements strengthens. If the bulls support their leverage positions through significant spot purchases, it could drive prices higher, resulting in more intense upward volatility.
Potential Short Squeeze: When short positions are suppressed by bullish forces, price increases may force shorts to cover their positions, leading to them buying back Dogecoin. This 'short squeeze' effect could further drive up Dogecoin's price, especially in the coming days.
Dogecoin Price Prediction: A Break Above $0.45 Could Trigger Larger Gains
If Dogecoin can maintain the current bullish leverage imbalance and stay above the critical support level, the price is expected to move towards the higher resistance level of $0.45.
To confirm this bullish prediction, the expansion of the Bollinger Bands indicator indicates that both trading volume and volatility have increased, further supporting the possibility of retesting $0.45.
Additionally, DOGE's price is currently above its volume-weighted average price (VWAP) of $0.40. If DOGE can maintain this critical support level under ongoing market speculation, the likelihood of breaking through $0.45 significantly increases.
However, traders must remain cautious, as excessive leverage could lead to significant pullbacks if the market reverses.
In this scenario, if the bulls fail to hold the support level at $0.40, a rapid long liquidation could trigger a price drop, with targets potentially falling near the 20-day simple moving average (SMA) around $0.31.
