Dogecoin (DOGE) open interest tops $1.4B — Is it time for memecoins to correct?

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Dogecoin (DOGE) open interest tops $1.4B — Is it time for memecoi…
Cointelegraph
Dogecoin (DOGE) open interest tops $1.4B — Is it time for memecoins to correct?
Mar 5, 202404:26 GMT+6:30


DOGEUSD
−6.72%

BTCUSD
−3.29%

SOLUSD
+1.13%

XRPUSD
−2.85%
Dogecoin
DOGEUSD
has been at the heart of the memecoin frenzy for over a decade, and it continues to post wild gains, such as the 95% increase in the past 7 days alone. However, the rally has been accompanied by a record-high $1.4 billion futures open interest in Dogecoin, triggering speculation of excessive optimism among investors.

Can Dogecoin repeat the 10x gains from previous cycles?

Some analysts argue that there is no altcoin season without a DOGE pump, and there is some truth to that, given its track record and $24 billion market cap, making it a top-10 cryptocurrency.

Technical analysts argue that Dogecoin is repeating "past bull markets" of explosive gains after 22 months of consolidation. One such example includes a post from user ali_charts on X social network.

Ali
@ali_charts
The price action of #Dogecoin appears to mirror patterns observed in its past bull markets. If history repeats itself, we could see $DOGE enter a parabolic breakout around April! pic.twitter.com/fL1J3CP3mR

Feb 26, 2024
Firstly, one should note that price charts in a logarithmic scale tend to minimize price oscillations in the past, making it easier to 'forget' the 120% pump in July 2020 or the 145% gains in October 2022 and attribute those as part of a lateralized market. Additionally, the definition of a bull market can be seriously questioned, as some of those periods include a 67% correction in 40 days between June and July 2017 and a 47% retrace in February 2021.

Regardless of whether the recent 95% weekly gains are the initial phase of a bull run or not, DOGE’s futures aggregate open interest had never been above $1 billion. In fact, every previous venture above $550 million open interest has been followed by a sharp DOGE price correction. So, either something has fundamentally changed in the leverage demand, or retail is being overly optimistic with the bullish momentum.

Cointelegraph

Note that Dogecoin's current $1.4 billion open interest is significantly higher than previous peaks, yet Dogecoin is trading 77% below its all-time high. In essence, data shows that the interest in leverage has surged to levels previously unseen, regardless of being measured in U.S. dollar value or in DOGE terms. Still, one cannot attribute the increase to retail traders gambling on the price increase without further details.

An increased demand for Dogecoin’s futures open interest could be explained by institutional players using DOGE’s price as a proxy for the altcoin market. Similarly, savvy whales could be shorting DOGE, thus betting on the downside, while simultaneously opening leverage long (bull) positions on other memecoins. None of these cases should be deemed risky or unhealthy, given that they vastly differ from retail traders' typical reckless use of leverage.

Dogecoin futures indicate bulls are getting overly optimistic

To get a detailed picture of how leverage is being used, one should analyze the perpetual contracts (inverse swaps), which incorporate an embedded rate typically recalculated every eight hours to compensate for excess demand. A positive funding rate indicates bulls are the ones demanding additional leverage.

Cointelegraph

Data indicates that DOGE futures funding rate has rallied to the highest levels in over 18 months at 0.11%, equivalent to 2.3% per week. Typically, rates above 1% per week indicate excessive optimism, but one must not immediately consider anything above such a threshold as unhealthy.

During bull runs, even market makers and whales might find themselves temporarily out of liquidity, something that can last for a couple of weeks. In time, as those entities raise cash, the funding rate normalizes, something not necessarily driven by a price correction.

As a comparison, the funding rate on other coins such as Bitcoin
BTCUSD
, Solana
SOLUSD
and XRP
XRPUSD
presently stands near 1.5% per week, so one could argue the entire cryptocurrency market is overheated.

Consequently, deeming Dogecoin as some form of a leading indicator for a sharp correction in the memecoin sector due to its current leverage seems unfounded.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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Bitcoin News
Breaking News: BREAKING: Bitcoin Price Soars To New All-Time High Above $69,000
Bitcoin
Bitcoin Rally Continues: Analyst Predicts $70,000 Target Soon
Godspower Owie by Godspower Owie March 5, 2024



Bitcoin continues to maintain its momentum toward the upward trajectory, touching the $68,000 price mark earlier today, leading to speculations about how long it will take to hit a new peak.

Bitcoin To Reach $70,000 In A Matter Of Time
With the price action of Bitcoin today, several crypto analysts are bullish about BTC as they believe that the crypto asset could reach a new peak very soon. The digital asset recently touched the $68,000 threshold for the first time in nearly 3 years, placing it just short of capping off a notable recovery.

Related Reading: Bitcoin Proves European Central Bank Wrong: Hits All-Time High Against Euro
In a post on the social media platform X (formerly Twitter), Cryptocurrency analyst and enthusiast Crypto Jelle has expressed his bullish optimism toward BTC with the community. His predictions examine Bitcoin’s current price position and its potential to surpass its all-time high.

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According to the crypto expert, the price of BTC is just “inches away” from reaching unprecedented heights. He pointed out that the coin tried to break through its current peak but was unsuccessful.

Additionally, he noted that the crypto asset is presently “retesting the 4-Hour 25 Exponential Moving Average (EMA) and the 50 Relative Strength Index (RSI).” Nonetheless, crypto Jelle believes that “both trends are good entries that could trigger a bounce” to a new level.

Bitcoin
BTC within inches away from its peak | Source: Crypto Jelle on X
As a result, the analyst has predicted the asset to reach “$70,000 in only a matter of time.” Furthermore, he has urged the community to be patient as this is the “name of the game.”

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The post read:

Bitcoin is within inches of a new all-time high. Rejected on its first attempt, but now retesting the 4-Hour 25E MA and the RSI 50 level. Both tend to be good entries for a bounce. $70,000 is a matter of time, and patience remains the name of the game.

As Bitcoin continues to rally, the token’s fear and greed index seems to have also skyrocketed. Jelle has also highlighted in another post that BTC’s “fear and greed index are presently reaching extreme levels.”

However, this does not imply that we will be seeing a pullback, according to the expert. He then clarified that as of the time Bitcoin surpassed $20,000, the fear and greed index was higher than it is now while urging investors not to be “shaken out” of the market.

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BTC Could Hit $150,000 Before 2024 Closes
The head of research at Fundstrat, Tom Lee, has also shared his optimism toward BTC in an interview with CBNC. Tom Lee’s optimistic overview came in light of the asset drawing close to its peak.

Related Reading: Bitcoin Rally: Crypto Analyst Says New Peak Is Within Arms’ Reach
According to Lee, he believes that Bitcoin is heading straight back towards its “long-term trendline.” Due to this, he has placed his price target at “$82,000 in the short term.” Lee also predicted a long-term price for BTC, putting his target at “$150,000 before the year closes.”

Presently, Bitcoin is situated at $66,710, up by over 2% in the past day, and above 18% in the past week. CoinMarketCap shows that its market cap and trading volume are up by 2.70% and 70.61% in the past day, respectively.

Bitcoin
BTC trading at $66,772 on the 1D chart | Source: BTCUSDT on Tradingview.com
Featured image from iStock, chart from Tradingview.com
Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.
Tags: bitcoinbtcbtcusdBTCUSDTCBNCCrypto JelleEMAExponetial Moving AverageFundstratRelative Strength IndexRSITom Lee


Godspower Owie
Godspower Owie
My name is Godspower Owie and i am an employee for Bitcoinnist and NewsBTC news outlet. Sometimes i like to picture myself as an explorer, this is because i like visiting new places, i like learning new things (useful things to be precise), i like meeting new people - people who makes an impact in my life no matter how little it is. I cherish my time, my work, my family, and loved ones. I mean, those are probably the most important things in anyone's life. I don't chase illusions, i chase dreams.

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