Could Dogecoin (DOGE) be heading towards a downward trend after a notable increase this week? The popular meme-inspired digital currency has shown significant upward movement recently, but it seems to be approaching levels where selling pressure might start to emerge.
About seven days ago, it was evident that Dogecoin was struggling to maintain momentum following the selling pressure observed at the end of September. Nonetheless, it managed to attract bullish interest starting from last Friday.
Putting things into context, DOGE continued its upward trend in the past 24 hours, reaching a price of $0.135 at the time of writing. This marks the eighth consecutive day of positive performance.
However, this upward trend is expected to slow down, potentially leading to profit-taking by individuals who entered the market at lower price levels.
With the increase in Dogecoin’s prices, its Relative Strength Index (RSI) has entered the overbought territory. It has surpassed the initial resistance level near $0.128 and is now eyeing the next resistance level around $0.140.
Examining the Potential Build-Up of Selling Pressure on Dogecoin
The recent performance of Dogecoin is not accidental. Data from on-chain sources indicates significant involvement from whales or large holders. Notably, there was a substantial spike in large holder flows on Thursday, with inflows peaking at 1.17 billion DOGE.
During the same period, large holder inflows reached $640.1 million DOGE.
The difference implies that there was a net positive flow of over $71 million from large holders alone. This surge in large holder inflows confirms ongoing strong demand despite the rising prices, suggesting the potential for further upward movement, provided that selling pressure does not intensify.
An analysis of Dogecoin balances held over time may provide valuable insights into the likelihood of profit-taking. Hodler balances declined from 72.97 billion coins on October 12th to 72.17 billion DOGE on October 18th.
Similarly, cruiser balances decreased from 74.89 billion coins to 73.77 billion coins during the same period.
Despite these outflows, retail trader balances have offset any potential decrease. Their balances increased from 8.75 billion DOGE to 10.74 billion DOGE between October 12th and 18th.
The findings above suggest that some whales and swing traders have been capitalizing on the upward movement to take profits. However, strong demand from the retail segment has been instrumental in supporting Dogecoin’s rise.
The bullish momentum may, therefore, be limited without substantial accumulation by large holders. Nonetheless, these observations underscore the growing confidence among Dogecoin holders as we head into the fourth quarter of 2024.