The price of Dogecoin has increased by 31% over the past week, attracting wide attention from investors due to bullish market sentiment. The recent rise, driven by optimism and speculative trading, has led to Dogecoin trading at $0.22.
However, this growth is unlikely to be sustainable, considering the circumstances surrounding its rise and the potential for a price correction.
Speculative rise of Dogecoin: signs indicate a possible reversal
The current Network Value to Transactions (NVT) indicator for Dogecoin is higher than during the bull market in November 2024. A high NVT indicator signals that the network valuation exceeds its transaction activity. This indicates that the recent rise was more driven by speculative emotions than by strong fundamentals.
While the NVT indicator was elevated during previous bull markets, it currently indicates unsustainable growth. Unlike the bull market in November 2024, when strong market fundamentals and significant transaction activity supported the rise, this recent increase lacks the necessary foundation. This suggests that the current price jump of Dogecoin is driven by short-term market hype rather than long-term growth potential. The recent rise of Dogecoin is also characterized by relatively low transaction volume. This further confirms the notion that this price increase is speculative. In November 2024, the price jump of Dogecoin was backed by significant transaction volume of $10.27 billion at its peak. However, this week, despite similar increases in network value, Dogecoin achieved only $1.2 billion in transaction volume at its peak.
The difference between price growth and stagnation of transaction volume indicates that demand for Dogecoin is not keeping pace with its recent price increase. This discrepancy further suggests that the rise is more driven by emotions than by solid market interest. The price of DOGE needs to establish support.
The price of Dogecoin currently stands at $0.22 after a 31% increase over the past week. While it remains above this key support level, the speculative nature of the rise suggests that it is unlikely to continue. Market conditions and a lack of strong demand increase the likelihood of a reversal.
Given the aforementioned factors, Dogecoin is vulnerable to price decline. If the price falls below $0.22, it is likely heading towards $0.19 or $0.18, potentially losing psychological support at the $0.20 level in the process. This would confirm the bearish outlook and mark the end of the recent increase. The only scenario in which the bearish thesis could be disproven is if the price of Dogecoin can bounce off the support level of $0.22. A recovery above $0.24 would help restore investor confidence. However, current market signals point to a price correction rather than further growth.#BinanceSquare #TradeStories #Write2Earn #crypto #SaylorBTCPurchase $DOGE