Dogecoin [DOGE] has recently dropped below a critical support threshold on its 1D chart, following a 50% decrease from its peak in the fourth quarter, with $0.20 now establishing itself as the third pivotal level in the current year.
Simultaneously, valuations in the meme sector have declined by $15 billion in a week, with DOGE alone losing $8 billion. The ability of DOGE to maintain this position is now under considerable scrutiny.
Commencing with: Decelerating network expansion
DOGE’s network is witnessing a rapid contraction, evidenced by the sharp drop in new address creation from 1.29 million at $0.38 in November to a mere 31K currently – signifying a massive 97% decline.
With holders selling off and limited new investments flowing in, the imbalance between supply and demand is pushing DOGE towards lower price points.
Unless there is a substantial recovery in network activity, the long-term outlook for Dogecoin appears bearish.
The likelihood of regaining its peak of $0.48 following the elections seems remote, while achieving the much-anticipated target of $1 remains elusive.
However, the key question remains – can DOGE transform $0.20 into a support level?
Amid the broader market turbulence, Dogecoin has seen an 18% reduction in its weekly gains, resulting in the liquidation of $7.64 million in long positions over the last 24 hours.
Data from the network indicates a significant decrease in DOGE holdings in wallets containing 1M–10M tokens, reaching a low not seen in six months, with over 460 million coins shed.
Moreover, a major wallet belonging to whales holding 100M–1B DOGE has sold an astounding 6 billion coins since the rally post-election, intensifying the selling pressure.
In the immediate future, the possibility of a resurgence to $0.25 – its former resistance level – is uncertain due to weak accumulation and unfavorable macroeconomic conditions.
If external challenges worsen and Bitcoin[BTC] falls below its $84K support level, Dogecoin could encounter significant obstacles in protecting its $0.20 price foundation.