Dogecoin Jumps 10%, But This Signal Could Bring Rally To A Stop
November 17 2023 - 9:00AM
NEWSBTC
Dogecoin has seen a rise of about 10% during the past day, but
longs are piling up on the futures market, which may be something
to keep an eye on. Dogecoin Funding Rate Attains Highly Positive
Values After Rally As explained by the on-chain analytics firm
Santiment, DOGE traders are betting on the price rise to continue
as long positions are being opened on the futures market. The
indicator of interest here is the “Binance funding rate,” which
keeps track of the periodic fee that Dogecoin futures contract
holders on Binance are exchanging with each other right now. When
the value of this metric is positive, it means the long investors
are paying a premium to the short ones in order to hold onto their
current positions. Such a trend implies the majority of the market
holds a bullish sentiment. Related Reading: Bitcoin NVT Remains
Bullish, All-Clear Signal For Rally? On the other hand, negative
values imply a bearish mentality is the dominant force in the
sector as the DOGE short traders are outweighing the longs at the
moment. Now, here is a chart that shows the trend in the Dogecoin
Binance funding rate over the past month: The value of the metric
appears to have been positive in recent days | Source: Santiment on
X As displayed in the above graph, the Dogecoin funding rate on
Binance has turned highly positive recently as the latest rise in
the meme coin’s price has taken place. This implies that
speculators have jumped onto the opportunity and are betting on the
price rise to continue. Since the longs have started piling up in
this latest futures mania, the asset has only continued to trend
up, suggesting that the bets of these traders have paid off so far.
However, if history is anything to go by, the market being heavily
long dominated has generally not ended well for DOGE. From the
chart, it’s visible that similar spikes in the Binance funding rate
coincided with local tops in the cryptocurrency during the last few
weeks. The reason why such a pattern may exist is that as the
futures market accumulates long positions, the chances of a long
squeeze taking place become significant. A “squeeze” refers to an
event where a sudden swing in the price unleashes a cascade of
liquidations on the sector. This cascade of liquidations only makes
the swing sharper, thus extending the rally/crash (depending on
which side of the market is taking the brunt). Related Reading:
Bitcoin Bearish Signal: Exchange Inflows Hit $1.2 Billion In Past
Month When longs are much more in number, such a waterfall of
liquidations is naturally easier on their side as compared to the
shorts. Thus, while Dogecoin is riding on some sharp momentum right
now, any pullback might result in a long squeeze, which could lead
to the asset registering a notable drawdown. DOGE Price Following
the latest rally, Dogecoin has surged towards the $0.087 level for
the first time since April. DOGE has observed some rapid growth in
the past day | Source: DOGEUSD on TradingView Featured image from
Kanchanara on Unsplash.com, charts from TradingView.com,
Santiment.net
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