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Dogecoin (DOGE), the popular memecoin, is currently attempting a recovery towards the $0.166 mark, a level where it commenced April and which now acts as a significant resistance. Bulls faced rejection at this price point on April 13th, highlighting the challenges in reversing the substantial downtrend experienced over the preceding months. While a minor price bounce occurred from the long-term support at $0.143, on-chain metrics are raising concerns about a potential overvaluation of the asset.
NVTS Signals Potential Premium on Dogecoin
The Network Value to Transactions Signal (NVTS), a modified version of the NVT metric, suggests that Dogecoin might be trading at a premium. This metric, which utilizes a 90-day moving average of transaction volume, becomes elevated when a cryptocurrency’s market capitalization grows faster than its utility, as reflected by its transfer volume. Currently, the upward trend in the NVTS, despite periods of sideways or downward price action over the past four years, indicates depressed on-chain activity. This scenario is typically unwelcome for investors, particularly during a price downtrend.
Bearish Sentiment Deepens with Negative MVRV and Declining Activity
Further reinforcing the bearish outlook is the deeply negative 180-day Market Value to Realized Value (MVRV). This metric reveals that investors who acquired Dogecoin in the past six months are currently facing significant losses. Adding to these concerns, both the transaction count and the number of daily active addresses have experienced a slight decline over the past six weeks. This drop in transaction activity could be a contributing factor to the rising NVTS. Notably, dormant circulation saw spikes on April 9th and 15th near local lows, potentially signaling capitulation among some holders.
Long-Term Outlook Clouded by Reduced Demand and Holder Losses
The combination of a rising NVTS, falling transfer volume and transaction count paints a concerning picture for long-term Dogecoin investors. This confluence of factors points towards reduced demand for the memecoin, coupled with substantial losses for current holders, underscoring the prevailing bearish sentiment. Even as Dogecoin attempts to breach local resistance levels, these on-chain indicators suggest that a sustained recovery may face significant headwinds.
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.
Also Read: Dogecoin Goes Mainstream: 21Shares Launches First-Ever DOGE ETP on Swiss Exchange
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