- A slowdown by whales may negatively affect price action.
- DOGE could rise to new highs if more crypto exchanges list it.
After rising for consecutive days and gaining more than 100% in a week, Dogecoin was 8% down today, trading at $0.60 at the time of this writing. However, the cryptocurrency was still up by 96% compared to its price seven days ago. DOGE is now ranked 4th in the cryptocurrency market with a capitalization of $129 billion. That has been no mean feat, and it has taken a rise of more than 12,000% in a year to get to where it is.
The outlook for cryptocurrencies remains strong, with mainstream financial institutions increasingly embracing digital assets. Goldman Sachs has made a strong statement of intent by investing $15 million in cryptocurrency analytics provider, Coinmetrics.
The move can be interpreted as a positive verdict on cryptocurrencies in the long term. It is a pointer to the attractiveness of the sector. The potential for a crypto-equivalent of Bloomberg Terminal should be a wake-up call to undecided investors regarding cryptocurrencies.
A solid foundation for growth
Cryptocurrency analysis firm Galaxy Digital, in its latest evaluation of Dogecoin, has professed that indeed Dogecoin’s fundamentals are impressive, difficult as it may be to make sense of its stratospheric rise. The report acknowledges the inefficiencies in DOGE but cites a strong support base, key among them being longevity, genuine origin, and near terming outlook for the cryptocurrency, based on the growing number of users.
Exchange platforms and institutional investors to drive growth
Dogecoin has recently benefited from the announcement by eToro, an online trading platform, that they have integrated the cryptocurrency on their platform. The company cited a solid technical base as well as a proof-of-work mechanism as the main reasons behind the move.
In a closely related move, Gemini also added DOGE to its platform. The move is significant, bearing in mind that many crypto exchanges are yet to accept Dogecoin. The main reason given by these platforms is the perceived volatility of the cryptocurrency. However, DOGE’s rise to the fourth spot builds a strong case for its possible inclusion by more exchanges. If and when that happens, the demand for the cryptocurrency will almost certainly rise, with prices in tow.
Dogecoin’s gains over the past week triggered so much traffic that trading platform Robinhood crashed on Tuesday as a result. The outage lasted about an hour but was proof enough as to why DOGE went past $0.6 during that time.
Dogecoin’s rise has not been without substance. Institutional interest in cryptocurrency has risen significantly. Major League Baseball franchise Oakland Athletics has become the latest big-name adopters of Dogecoin. Through a Twitter announcement, the franchise revealed that they would accept DOGE for ticket payments. This is the first one for an MLB team, but the second time a major sports franchise has adopted Dogecoin, following an earlier move by NBA’s Dallas Mavericks.
A coin for the whales?
Dogecoin’s rise has undoubtedly been popularity-driven, hence the moniker, “joke currency.” However, closer scrutiny of the transactions involving DOGE shows that whales are largely responsible for the majority of activity in the DOGE ecosystem. This casts doubts on just how much of the alleged popularity translates into demand. For example, according to Bitinforcharts, two days ago, Ethereum had 1.4 million transactions, Bitcoin’s blockchain had 300,000, while Dogecoin’s blockchain activities only had 76,000 transactions.
While these figures may be understandable, bearing in mind the market shares of these cryptocurrencies, the average transaction costs paint a different picture. Dogecoin led both BTC and Ether in terms of the average value of a transaction, recording $800,000, which is almost twice BTC’s $420,000.
This is a strong testimony of the fact that bulk purchases may have propelled DOGE more than perceived. If that is the case, Dogecoin’s rise may soon cool down once the whales slow down on their purchases. The fact that DOGE has a limitless supply doesn’t help matters either, as there’s an assurance that demand will always be met. This may lead to a price decline in the near-term.
Dogecoin is likely to find the first support at $0.56. The Relative Strength Index (RSI) is at 45, showing that a downtrend is possible. In that case, the second support will be at $0.52. A breach of this level will send prices below $0.50. If the bulls take charge, the first resistance level is likely to be at $0.61, beyond which the second barrier will be at $0.67.