The price movement of Dogecoin has been quite turbulent in recent times, with the widely popular meme-based cryptocurrency seeing a significant surge before facing a sudden downturn. This sudden volatility has raised concerns among investors regarding the potential extent of the coin’s decline if the current bearish trend persists.
By examining Dogecoin’s price trajectory, the Network Value to Transaction (NVT) ratio, and the prevailing market sentiment, some insights can be gleaned regarding the future direction of the digital asset.
Indications of a Possible Downtrend for Dogecoin’s Price
After reaching a recent peak, Dogecoin’s price chart clearly shows a downward trend.
Following a bullish phase that propelled it to a high of $0.17976, the cryptocurrency has retraced, currently trading around $0.15048. The decrease in trading volume indicates a weakening buying interest.
The Moving Average Convergence Divergence (MACD), previously displaying bullish momentum, is now leveling off, suggesting a potential shift towards a bearish trend.
Furthermore, the Relative Strength Index (RSI) is hovering around 56.63, moving away from overbought levels. Should this trend persist, Dogecoin might test significant support levels at the 0.382 ($0.14970) and 0.5 ($0.14042) Fibonacci retracement levels.
Spike in NVT Ratio Indicates Possible Dogecoin Overvaluation
Another key metric to consider is Dogecoin’s Network Value to Transaction (NVT) ratio. Historically, peaks in the NVT ratio have often coincided with market sell-offs.
The recent surge in the NVT ratio suggests a probable overvaluation concerning the current transaction volume, signaling a potential correction in price.
A high NVT ratio may indicate an inflated value without a proportional increase in transaction activity, potentially indicating speculative investor behavior rather than genuine network utilization.
Should this metric continue to rise, it might signal further downside risks for Dogecoin.
Crucial Price Levels to Monitor Amid Bearish Sentiment
Aside from the previously mentioned support levels, traders are closely monitoring Dogecoin’s 50-day and 200-day moving averages, located at approximately $0.12409 and $0.12724, respectively.
A breach below these averages could trigger additional selling pressure, potentially driving Dogecoin back to the $0.12 range. Conversely, stabilizing around the $0.15 mark might suggest that the recent downtrend is nearing its end.
However, given the existing market sentiment and the heightened NVT ratio, a downward trajectory seems more probable in the short term.
Recent price dynamics and the elevated NVT ratio indicate a challenging path forward for Dogecoin. If bearish sentiment persists, the cryptocurrency could revisit lower support levels before establishing a more stable position.