As of the time of authoring this piece, Dogecoin [DOGE] faced challenges in its upward price trajectory. The previous optimistic sentiment surrounding DOGE and other memecoins has dissipated over the recent months.
This decline can be attributed in part to Bitcoin [BTC], which has been struggling to maintain the $100k support level for the past six weeks.
Data from CoinMarketCap indicated that the market cap of memecoins had dwindled to just $96.5 billion at the time of writing, down from $137 billion on 09 December. This decrease underscores the prevailing bearish sentiment surrounding Dogecoin and other meme-based cryptocurrencies.
The question now arises: Can the leading player in this sector stage a recovery in the upcoming weeks?
Significant Drop in Daily Active Addresses with No Signs of Revival Yet
During the peak of the memecoin craze in November, the daily active addresses for Dogecoin witnessed a soaring surge. Surpassing 1.68 million active addresses on 22 November, this figure quickly retreated in the days that followed. Moreover, the transaction count experienced a notable decline, especially post-mid-December.
Throughout December and January, the count of active addresses stagnated at relatively low levels, hovering around the 70k mark. While this number is respectable, it remains significantly lower compared to previous highs.
The 90-day circulation metric reflects the unique tokens transacted over a 90-day period, which has shown a consistent uptrend in the past two months, indicating a growing demand for DOGE. Conversely, the 7-day moving average of token velocity has been on the decline.
This decline in token velocity hints at a reduction in trading activities and an increase in holding behavior, potentially signaling on-chain accumulation.
Potential for Short-Term Recovery in Dogecoin’s Price
The market outlook on the 4-hour chart leans towards bearish territory. Following a rebound from the 50% retracement level, a lower high was set at $0.341. A decisive close above this level in a 4-hour trading session could signal a bullish shift in the market structure.
While the trading volume has been on a downward trend during the recent price recovery, the On-Balance Volume (OBV) has displayed lukewarm performance and exhibited a downward trajectory last week.
The volume indicators pointed towards a bearish scenario; however, there has been a shift towards bullish momentum. The Awesome Oscillator has crossed above the neutral zero line, and a retest of the $0.336-$0.34 range may be on the horizon.
Examining the liquidation heatmap from the previous month reveals two critical zones of interest for Dogecoin. To the south lies the $0.3-$0.306 range, which acts as a strong support area capable of triggering a bullish reversal when breached.
Conversely, towards the north, the $0.36-level exhibits a considerable cluster of liquidation levels. Considering the volume indicators, a move towards $0.3 appears more probable in the coming week or two.