Dogecoin (DOGE) has taken a significant hit this week, falling to $0.4127 on Tuesday morning, a sharp 15% drop from its year-to-date high. The decline mirrors the broader cryptocurrency market’s downturn, raising concerns about DOGE’s immediate future. So, what’s driving this crash, and could it signal a deeper pullback for Dogecoin?
Why Is Dogecoin Price Falling?
The primary catalyst for Dogecoin’s drop is the overall softness in the cryptocurrency market. Bitcoin (BTC), the dominant player in the crypto world, recently fell below $96,000, after hitting a record high just a week ago. Analysts are predicting that Bitcoin could drop as low as $90,000, forming a rising wedge pattern and showing bearish divergences. This technical setup often signals a potential price decline, which is affecting altcoins like Dogecoin.
Beyond the crypto market, macroeconomic concerns are also weighing on Dogecoin’s price. Moody’s chief economist Mark Zandi recently warned about the risks posed by the US Treasury market, particularly with the rising public debt—now over $36 trillion. With countries like China and Japan scaling back their purchases of US debt, Zandi predicts that bond yields will surge in 2025, causing a rotation from riskier assets like cryptocurrencies into safer investments.
I’ve argued that most asset markets appear overvalued, bordering on frothy. Stocks, corporate bonds, single family housing, crypto and gold, quickly come to mind. But what could be the catalyst for them to selloff? How about a meaningful correction in the Treasury bond market.
— Mark Zandi (@Markzandi) December 8, 2024
This heightened volatility in the bond market could lead to more downside for DOGE in the coming months.
Altcoin Season Cooling Off
Dogecoin’s decline also coincides with a pullback in the altcoin season index. After reaching 87 last week, the index has dropped to 68, meaning that fewer altcoins are outperforming Bitcoin. Historically, a decline in this index often signals that altcoins, including DOGE, will follow Bitcoin’s downturn. Additionally, the crypto fear and greed index has softened from 85 to 83, further reflecting the cautious sentiment in the market.
Technical Indicators Suggest a Potential Drop
On the daily chart, Dogecoin’s price had peaked at $0.4800 earlier this month but has since retreated. Despite the pullback, DOGE has managed to stay above both the 50-day and 100-day Exponential Moving Averages (EMAs), which could indicate that this dip is a part of the “mean reversion” cycle—a common phenomenon where prices retrace to their moving averages after a strong rally.
Additionally, Dogecoin’s price has formed an ascending channel, with bearish divergence patterns showing up in the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD). These indicators suggest that DOGE may continue to dip toward the 50-day EMA at $0.3297 before it resumes its upward trend. A sustained rally would likely require DOGE to break above its recent resistance at $0.4800, the high reached earlier this week.
What’s Next for Dogecoin?
Dogecoin’s short-term outlook remains uncertain, as it faces multiple headwinds from both the broader crypto market and macroeconomic factors. If the price continues to retreat, the 50-day moving average at $0.3297 could act as the next significant support level. However, if DOGE manages to hold above this level and break through its key resistance at $0.4800, a resumption of the uptrend is possible.
In the meantime, investors should remain cautious, as Dogecoin’s future largely depends on the broader market dynamics and macroeconomic conditions. If Bitcoin continues its correction, it could drag DOGE further down. However, any positive shifts in the crypto market or broader economic conditions could trigger a rebound, making Dogecoin an interesting asset to watch in the coming weeks.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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