The price of Dogecoin declines as the broader cryptocurrency market undergoes a correction and traders opt to secure their profits.
The price of DOGE has had a decline of more than 5.5% in the past 24 hours, reaching a low of $0.1712 on April 3rd. This performance is weaker compared to the overall cryptocurrency market, which saw a decrease of approximately 0.17% during the same timeframe.
The price of the memecoin has decreased by around 7.7% in the past two days, which is in line with the correction observed in Bitcoin.
Let’s take a closer look at the most likely reasons behind Dogecoin’s latest pullback.
Dogecoin open interest drops below $2 billion
DOGE has posted tremendous gains recently, rising more than 11% between March 23 and March 28. The price then turned down on March 29 and currently trades 5.5% below its value a week ago.
DOGE’s decline over the last seven days also coincides with a drop in futures open interest (OI). Data from Coinglass shows that DOGE OI has fallen by 27.6% from $2.21 billion on March 28 to the current value of $1.60 billion.
Additionally, the funding rate for Dogecoin perpetual futures contracts had reduced from 0.107% to 0.021% over the same time period.
Reducing funding rates and OI suggest that traders are generally bearish about the asset’s next direction, expecting prices to go lower.
This negative sentiment can lead to more selling pressure, potentially lowering the asset’s price if other market conditions align. This seems to be the case with DOGE’s downward move today.
Whale activity backs DOGE’s correction
After the latest marketwide correction that saw millions of dollars liquidated, DOGE sank as low as $0.1712 and is currently 5% down on the weekly timeframe. However, the uptick in whale activity marks a bearish signal for Dogecoin.
Whale transactions are large transactions that involve the transfer of $100,000 or more worth of DOGE. According to on-chain data analytics firm IntoTheBlock, the number of DOGE transactions worth between $100,000 and $1 million has increased by more than 20% over the past seven days.
Similarly, the data also shows that the number of DOGE transactions larger than $1 million has increased by more than 200% in the last 30 days.
In an April 1 post on X market intelligence firm, Santiment shared the following chart saying,
“The top #memecoin by market cap (#8 market cap #crypto asset overall) is being powered by major dormant whales moving $DOGE back into circulation.”
This increase in dormant whale activity shows the long-term holders are now in profit after March’s rally in DOGE price and are now cashing in, validating the ongoing correction.
Bearish divergence
Dogecoin’s drop today precedes a period of growing bearish divergence between its price and the relative strength index (RSI).
Notably, DOGE’s price rallied between March 28 and March 31, forming higher lows. But, in the same period, its daily RSI dropped, forming lower lows.
As a rule of technical analysis, a divergence between rising prices and falling RSI indicates weakness in the prevailing uptrend, prompting traders to secure profits at local price highs.