Dogecoin [DOGE] broke out of the downward channel and retested the support level, reclaiming key technical levels. This confirms a bullish structure, with price action steadily maintaining above $0.22.
As of the time of writing, Dogecoin (DOGE) is trading at $0.2238, up 3.37% in the past 24 hours. The $0.25 area is the current resistance level, having previously served as a support level in February before turning into a supply zone.
Successfully breaking through this level could lay the groundwork for a rise to $0.35. However, if it fails to decisively reclaim lost ground, Dogecoin may face a short-term pullback.
Short liquidations dominate, reflecting increasing bullish pressure.
On-chain liquidation data shows that long positions are clearly dominant. On May 18, the total amount of short liquidations reached $387,000, while the total amount of long liquidations was only $65,000.
This huge disparity suggests a short squeeze across the entire market due to shorts being forced to exit their positions. This liquidation imbalance typically accelerates price volatility and creates upward pressure.
The MVRV Z score indicates that there is still room for further growth.
As of the time of writing, Dogecoin's MVRV Z score is approximately 0.94, well below the usually considered overvalued threshold of 2.5. This metric compares market capitalization to actual market value, providing insights into the profitability of average holders.
Lower scores indicate minimal unrealized profits, meaning most holders have little incentive to sell actively. Therefore, the current readings suggest favorable conditions for continued price increases.
Why is DOGE causing volatility concerns?
The inventory flow ratio of DOGE has surged to an unprecedented 99.53, indicating that the growth of circulating supply has significantly slowed or stopped, thereby increasing perceived scarcity.
However, such a significant increase may also indicate abnormal market activity or an impending volatility. Historically, sudden spikes in inventory flow ratios often precede major rallies and adjustments.
At the beginning of May, the number of daily active addresses surged to over 500,000 but then fell back to just 28,600. Similarly, the number of transactions also dropped from monthly highs to only 88,000. This sudden decline suggests that the earlier price rise may have been driven by short-term speculative interest rather than sustained utility or user growth.
Dogecoin derivatives data is mixed.
Total trading volume decreased by 22.05% to $3.46 billion, showing a cooling of speculative activity; however, open interest rose by 2.7% to $2.64 billion, indicating that traders are still holding positions. Options open interest increased by 10.61% to $378,980, possibly reflecting rising volatility exposure and hedging demand; while options trading volume plummeted by 85.89%, indicating reduced day trading speculation.
Can Dogecoin hold above $0.25? The pressure from short liquidations, the undervalued MVRV ratio, and rising open interest provide support, presenting significant potential. However, mixed on-chain activity and a spike in the inventory flow ratio bring short-term volatility risks. The bullish trend remains unchanged, but confirming a breakout above $0.25 and maintaining high trading volume is crucial for moving towards $0.35.
