Dogecoin [DOGE] is staging a strong recovery, regaining its position among the top 5 cryptocurrencies with a 20% increase in value over the past week. Currently priced at $0.1321, DOGE has surpassed the $0.13 threshold, a level it had not reached in over 150 days, following two unsuccessful attempts.
Traditionally, as Bitcoin approaches a significant psychological level, capital tends to flow into popular meme-based coins, and DOGE has clearly benefited from this trend.
Over the last three days, DOGE has experienced notable daily gains of over 7%, supported by a substantial trading volume of around $3 billion. Nonetheless, not all indicators are positive.
Possible Reversal for DOGE?
The sharp rise in trading activity echoes previous patterns where Dogecoin recorded substantial gains as Bitcoin neared a bullish peak.
If history repeats itself, there could be a potential reversal in store for DOGE, particularly as market conditions overheat, prompting investors who have enjoyed profits to start selling and secure their gains.
Further signs of a looming reversal come from the Relative Strength Index (RSI), which has now entered overbought territory, with approximately 83% of the price movement in the last two weeks being on the upside.
Moreover, the elevated RSI level suggests that DOGE might encounter selling pressure as the current rally begins to cool down.
As mentioned earlier, Dogecoin has had a highly rewarding week, surpassing even Bitcoin in terms of daily gains.
This surge enabled DOGE to break through a historically challenging price level, leading to half a million holders being in a profitable position—especially those who had been facing losses for more than three months.
Many investors secured these positions at an average price of $0.09, significantly lower than the current valuation.
Therefore, maintaining the support at $0.13 is critical. In case of a pullback, approximately 60 billion DOGE tokens could flood the market, intensifying selling pressure.
Nonetheless, there might still be room for further growth. This perspective remains cautiously optimistic, considering Bitcoin’s ongoing surge beyond $68,000.
Deciphering the Market Trends
Usually, a market bottom sparks fresh interest when prices hit local lows, attracting buyers to enter the market. As previously highlighted, Dogecoin has been in a downtrend for the last 150 days, reaching a low point of $0.09.
This price level was perceived as a buying opportunity, encouraging investors to accumulate DOGE at a discounted rate in anticipation of future profits. This is evident in the consistent outflow of DOGE tokens from exchanges, hitting $50 million on the day it dipped to $0.09.
Nevertheless, with DOGE surging by 25% this week, capitalizing on Bitcoin’s upward trajectory, it seems plausible that traders are beginning to exit their positions, as indicated by the inflows highlighted in green.
In conclusion, the market seems to be overheating, potentially leading to a correction in Bitcoin’s price. Meanwhile, DOGE could continue to witness significant gains in the coming days as Bitcoin holders strategize their next moves.
Therefore, while reaching a bullish rally to $0.14 may be deferred to a later cycle, a retraction to $0.12 appears more probable.