Dogecoin at its crossroads: Moment of truthHello, fellow traders!
This is my analysis on Dogecoin as well as the market sentiment overall.
1️⃣ Technical Analysis on Dogecoin
There are four major analyses for Dogecoin.
1. Dogecoin broke below the uptrend channel on December 12th.
We see Dogecoin breaking below the daily uptrend channel after touching the channel’s resistance line. The price attempted a bullish rebound on December 11th but failed, resulting in the break below and raising concerns about the future of the rally.
2. Dogecoin broke below the Price Action Zone yesterday.
Even after breaking below the channel, there was still a chance for Dogecoin to reenter the channel. If the price was within the Price Action Zone (PAZ), the rally could still have continued. However, exiting the PAZ greatly discourages this.
3. Dogecoin formed a ‘Double Top’ pattern.
Dogecoin, having formed two tops on November 23rd and December 8th, has broken below the neckline of 0.36482, which is a valid sign for a possible downtrend.
4. Dogecoin broke below the rectangular box.
Another bearish sign, similar to the PAZ breakthrough and the Double Top pattern, as the price of Dogecoin breaks below the rectangular box.
All of these are strong signs that are foreshadowing the bearish momentum.
However, the price of Dogecoin has currently rebounded after touching the major level of 0.34010, forming a bullish hammer candle. So, does this signal a good entry for long? What are we to expect from Dogecoin – and the market itself, for that matter?
2️⃣ Understanding the market
It's essential to understand the overall market movements first and also the reason behind them.
The crypto market has left investors with confusion over the past few days, but Bitcoin is continuing its bullish rally for now. Let’s have a look at the Bitcoin chart.
With Bitcoin falling over 5% yesterday, it is currently climbing back up with a green hammer candle. Today’s candle is particularly important as the price has touched both the support line of the current uptrend channel and the upper side of the major demand zone. Showing the rebound at this AoC (Area of Confluence – where more than two lines, zones or levels intersect) could indicate an additional climb especially with Bitcoin’s price remaining within the channel.
However, if the candle closes red, ignoring the AoC, this could heavily discourage the market’s bullish momentum.
BTC Dominance also continues to rise yet is forming a ‘shooting star’ candle today (for now) as altcoins including Dogecoin faces rebound.
Ethereum presents a particularly intriguing chart as it attempts to reenter the uptrend channel after breaking below yesterday. If the bullish momentum is strong enough, it could reenter the channel before today’s candle closes.
Today’s candles for these cryptos are important because they could shape the future direction of the market. Bitcoin closing below the channel could spark fear throughout the entire market and question many of the rally’s continuation.
Same goes for Dogecoin: the candle is currently green, but with considerable time remaining until the candle closes, Dogecoin could face downtrend – possibly toward 0.22930. Dogecoin exiting the uptrend channel & PAZ already shows that it has lost much of the bullish momentum it showed last month.
It is important to understand the context of the sharp decline yesterday – many of you may already be aware but for those who are not – the US Fed interest rate has been cut to 4.50% (from 4.75%). While this is typically a good sign for the market, the Fed also hinted that there will be fewer cuts in 2025 – triggering sharp declines across the major markets including stock and crypto.
Another (and more significant) thing worth noting as a crypto trader is that Fed Chair Powell has commented, “That’s the kind of thing that Congress to consider, but we are not looking for a law change,” when asked about the possibility of digital assets being held by the central bank. His answer, implying that the central bank currently has neither the legal right nor the intention of owning the digital currency, impacted the crypto market furthermore – because the current rally has mostly been driven by the hype of ‘digital currencies being adopted by the governments & banks as tools to cover their financial challenges such as paying national debt.’ But with Fed Chair dropping the axe that this is not going to happen (at least for a while), the rally loses its purpose – which could heavily damage its momentum. And the fear has already been reflected by the market as we see the sharp decline.
3️⃣ What to expect?
Before sharing my insights, I want to emphasize the following first:
The Crypto market, notorious for its high volatility, maintained its reputation today as Dogecoin’s price fluctuated wildly. (Being a full-time trader,) I’ve watched price moving up and down multiple times – at one point, it almost seemed like the price would drop straight down to 0.22930, only to reverse direction minutes later. Be very, extremely cautious – it is always wise to stay passive and observant before diving in instead of trading instantly upon price touching or breaking the major levels or zones - even if they look promising. Market is often very unpredictable.
Bitcoin seems to be performing well as the price remains within its uptrend channel.
However, the same cannot be said for Dogecoin or Ethereum. (Some altcoins like Uxlink are showing unusual movements despite the market sentiment, but these are most likely cases of manipulation and should be considered exceptions.) Dogecoin has already lost a big part of its bullish momentum and Ethereum is also stumbling with its price breaking below the channel. Of course, this is not to say or assume that the rally is over – no one knows the future. Consolidation often means building momentum for a bigger leap. Nothing is to be assumed.
For example, in my recent post on Ark CRYPTO:ARKUSD , I’ve mentioned that it is very unlikely that we would see a rebound at the AoC (red box in the chart below) due to the market sentiment then, but here we are with the possibility.
But it is true that the current chart of Dogecoin is currently leaning more towards the bearish side. If the price breaks below the red dotted line (0.34010) or even shows the bearish reversal upon touching (or nearing) the major zones or levels, there’s a chance the bearish movement would continue, granting us the short opportunities.
(Also, it’s not hard to imagine that some form of resistance may occur before any continued decline, so be mindful of a possible last squeeze – if the downtrend does materialize.)
React, don't predict! Stay disciplined and patient. Don't get greedy and be thankful.
God bless :)
Romans 5:8
