In April, the open interest for Dogecoin [DOGE] soared to an annual high of $12 billion, but by October, it experienced a significant decline. Despite a brief recovery at the beginning of the month, current open interest is approaching the lowest level since November 10.
This downward trend coincides with a 20% price drop in Dogecoin over the past week, raising concerns in the market about its short-term trajectory. What impact will the recent shift in market sentiment have on Dogecoin's future?
It is noteworthy that Dogecoin's open interest has significantly decreased to $1.42 billion, starkly contrasting with the April peak of $12 billion. Particularly during the time when Dogecoin's price dropped to $0.32, the ongoing reduction in open interest shows that traders are opting to close positions as optimistic expectations wane.
This bearish trend in OI typically indicates a diminishing confidence in a short-term price recovery.
Additionally, with DOGE's price dropping 20% in the past week, the shrinkage in OI suggests that traders are cautious about opening new positions, and further pullbacks may occur unless market sentiment reverses.
MDIA signals indicate that market sentiment is stagnant and cautious.
MDIA indicates that Dogecoin holders are increasingly opting to hold rather than trade their assets.
MDIA tracks the average age of coins weighted by their purchase price on the blockchain, and this index has steadily risen to 335 days. This trend indicates that long-term holders are not actively trading or reallocating their assets, suggesting that the market is stagnant.
Historically, a rise in MDIA is associated with reduced liquidity and decreased demand, which is often viewed as a bearish signal.
If this upward trend continues, it indicates a lack of new capital or speculative activity in the Dogecoin market, which aligns with the recent price drop. This supports the notion that cautious sentiment dominates Dogecoin's short-term outlook.
With bearish momentum prevailing, Dogecoin struggles below critical support levels.
On the daily chart, Dogecoin is struggling to recover critical support levels after a recent decline.
The price has fallen below the $0.35 threshold, a level that previously served as a significant support, indicating that bearish momentum continues to dominate.
The MACD indicator further confirms the current bearish trend. As of this report, the MACD line is in negative territory, clearly indicating downward momentum. Although the histogram shows a slight easing of bearish pressure, any hopes for recovery are rather bleak until a clear bullish crossover signal is observed.
If the current bearish trend continues, Dogecoin may reach a support level of $0.27 in the short term. However, if buyers can successfully push the price above $0.35 and maintain this upward momentum, a rebound targeting the resistance area at $0.48 may occur.
However, it is noteworthy that this potential rebound largely relies on an increase in trading volume and a surge in new buying pressure, both of which are currently showing moderate trends.