Tue November 26, 2024 ▪
3
min read ▪ by
Dogecoin is making headlines again. After a spectacular rise, the famous memecoin seems poised to reach new heights, driven by the enthusiasm of crypto investors and the undeniable influence of Elon Musk. But behind this momentum lies a crucial question: is this the calm before the storm?
Excessive enthusiasm for Dogecoin
Dogecoin, the memecoin par excellence, seems to have regained its legendary popularity. Its open interest in futures reached an impressive record of $4.6 billion on November 23.
This figure, doubling the previous peak, reveals spectacular enthusiasm. However, this frenzy is reminiscent of speculative bubbles which often end up bursting.
This renewed interest coincides with a 224% increase in the price of the DOGE crypto between November 3 and 23, even though its value remains well below its all-time high of $0.74 reached in May 2021. Such a surge, driven by derivative products, raises questions. on the sustainability of this trend.
The history of Dogecoin teaches us that these periods of euphoriawhere leverage is king, are often followed by brutal corrections.
A notable precedent can be found in March 2024: after an 82% increase, DOGE saw its price drop by 40% in a few weeks, leading to massive liquidations. This example highlights the dangers of excessive leverage, in which quick gains give way to equally quick losses.
The Elon Musk effect and its limits
Elon Musk continues to play a major role in the evolution of the Dogecoin price. His tweets and initiatives, such as his involvement in government projects around DOGE, regularly fuel investor enthusiasm.
However, Dogecoin’s reliance on this influence raises a crucial question: can it thrive beyond Musk effect, who became the richest man in history?
At first glance, the current craze still seems linked to this support. However, unlike previous price increases, the recent move appears to be driven more by the spot market, suggesting increased participation from traditional investors.
This could mark a step towards a certain maturity, but signs of over-indebtedness persist.
The funding rate for perpetual contracts, which reflects the balance between buyers and sellers, remains relatively neutral at around 2%.
However, sporadic peaks, such as that of 7.5% on November 23, reflect the nervousness of the market. These fluctuations indicate that debt could quickly evolve, triggering a cascade of liquidations.
Despite its recent performance, Dogecoin appears vulnerable to a potential correction. While the Musk effect continues to play a catalytic role, it does not guarantee long-term stability. Prudent traders know that record open interest rates, while impressive, often hide underlying risks. In the meantime, Asia’s largest digital bank opens its doors to cryptocurrency trading.
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Fascinated by bitcoin since 2017, Evariste has never stopped researching the subject. If his first interest was in trading, he is now actively trying to understand all the advances centered on cryptocurrencies. As an editor, he aspires to continually deliver high-quality work that reflects the state of the industry as a whole.
DISCLAIMER
The views, thoughts and opinions expressed in this article belong solely to the author and should not be considered investment advice. Do your own research before making any investment decisions.