- DOGE bounced off a key support, highlighting potential for short-term recovery despite bearish patterns
- Declining network activity and a bearish MVRV signaled that a breakout may be unlikely soon
Dogecoin [DOGE] recently saw a massive transfer of 100 million DOGE (worth approximately $25.4 million) to Binance, sparking speculation about its next market move.
At press time, DOGE was trading at $0.2551 following a modest increase of 0.10% in the last 24 hours. The aforementioned whale move raises some very important questions – Could it be the catalyst for a breakout, or will the market continue to struggle?
What’s happening on DOGE’s chart?
Looking at DOGE’s price action, the cryptocurrency bounced from a crucial support zone around $0.25 – A sign of potential accumulation after recent pullbacks. This level has been important for Dogecoin in the past, meaning it may play a pivotal role in any future rally.
However, DOGE seemed to be under pressure due to a descending channel formation, suggesting the market may still favor the bears. At press time, the Relative Strength Index’s (RSI) 37.93 reading indicated that Dogecoin was oversold and may be due for a rebound.
Source: TradingView
Declining active addresses and transaction counts
On the network side, DOGE faced a concerning decline in daily active addresses and transaction counts. On 20 February, daily active addresses were 48,482 and the transaction count was 32,054.
This drop hinted at reduced network activity, which can be problematic for a cryptocurrency looking to sustain growth. Lower network activity often leads to decreased liquidity, causing higher volatility.
Source: Santiment
MVRV long/short difference – Where is the market sentiment heading?
Dogecoin’s MVRV (Market Value to Realized Value) long/short difference recently dropped to 11.52% too – A sign that many holders have been at a loss.
Such a negative sentiment could put downward pressure on DOGE, especially if traders decide to sell to avoid further losses. The bearish MVRV further hinted at a lack of conviction among market participants, which could contribute to sustained bouts of consolidation.
Source: Santiment
Dogecoin derivatives data – Is there a shift in market activity?
Dogecoin’s derivatives market painted a mixed picture too. While the 24-hour volume fell by 29.33% to $1.88 billion, Open Interest saw a modest hike of 1.09%. The volume drop pointed to a reduction in market participation – A sign of uncertainty among traders.
However, there has been a noticeable surge in Options volume, with the same climbing by 79.45% to suggest traders may be positioning themselves for potential volatility.
Source: Coinglass
Will DOGE break out or continue to struggle?
Despite recent signs of a potential bounce from a key support, DOGE faces multiple challenges that could impede a strong breakout.
At the time of writing, declining network activity, negative MVRV, and reduced derivatives market participation all seemed to point to cautious market sentiment. Therefore, while DOGE may see short-term rebounds, it remains highly uncertain whether it can break free from its current downtrend or not.
