Dogecoin has increased by 31% over the past week, attracting the attention of many investors due to the overall market optimism. The recent price surge, driven by optimism and speculative trading, has led to Dogecoin being traded at $0.22. However, this upward momentum is unlikely to be sustained for long due to the factors surrounding the surge and the potential for price correction.
Speculative Bullish Signals for Dogecoin Indicate a Reversal
The current Network Value to Transactions (NVT) ratio of Dogecoin is higher than during the price surge in November 2024. A high NVT ratio indicates that the network valuation exceeds its trading activity. This suggests that speculative sentiment has driven the recent price increase more than strong fundamental factors.
While the NVT ratio has increased in previous price surges, it currently indicates an unsustainable price increase. Unlike the surge in November 2024, when strong market fundamentals and significant trading activity supported the increase, this recent price surge lacks the necessary foundation. This suggests that the current price increase of Dogecoin is due to short-term market hype rather than long-term growth potential.
The recent price surge of Dogecoin is also characterized by relatively low trading volume. This further reinforces the idea that this price increase is speculative. In November 2024, the price surge of Dogecoin was supported by significant trading volume of $10.27 billion at its peak. However, this week, despite the network value also rising similarly, Dogecoin only reached $1.2 billion in trading volume at its peak.
The discrepancy between the price increase and stagnant trading volume indicates that the demand for Dogecoin is not keeping pace with its recent price surge. This mismatch suggests that the price increase is driven more by sentiment than by solid market interest.
DOGE Price Needs to Solidify Support
The price of Dogecoin is currently at $0.22 after a 31% increase in the past week. Although it remains above this important support level, the speculative nature of the price increase suggests that the price may struggle to continue rising. Market conditions and a lack of solid demand increase the likelihood of a reversal.
With the aforementioned factors, Dogecoin is susceptible to depreciation. If the price falls below $0.22, it is likely to head towards $0.19 or $0.18, potentially losing the psychological support threshold of $0.20 in the process. This would confirm a bearish outlook and mark the end of the recent price surge.
The only scenario in which the bearish argument could be invalidated 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, currently, market signals indicate a price correction rather than further increases.
