Dogecoin experiences a 14% decline in June, accumulating $132 million in potential losses - What's the way forward?
In a surprising turn of events, short traders are holding onto their Dogecoin (DOGE) positions despite significant unrealized losses, driven by a persistent bearish outlook supported by key market metrics.
On June 30, the taker sell volume outweighed buys, with 51.97% of the trades coming from shorts, signalling active bearish participation [1][2]. This trend, if continued, could potentially give bears full control of the market, pushing DOGE lower in the coming trading sessions.
Another metric supporting the short traders' case is the Liquidation Heatmap. Critical clusters of liquidity, or unfilled leveraged orders, exist just below the current DOGE price level around $0.165, near $0.162 and $0.159. These act like gravitational pull zones where the price is expected to drift. If the price reaches these zones, long positions are likely to liquidate, creating a cascade that would flip short traders' unrealized losses into realized profits [1].
The Long/Short Ratio, which indicates the balance between long and short positions, has fallen below 1 (currently around 0.92), suggesting that short positions dominate and that sellers are controlling market momentum. This ratio below 1 is typically a signal of rising short pressure, indicating that sellers are currently dictating the pace [1][2].
Despite $132 million in unrealized losses on short positions, traders are doubling down on their expectation of a steeper price drop. They are willing to hold their positions in anticipation of this deeper correction rather than closing at a loss [1][2].
However, bullish activity has helped suppress a steeper price decline. After peaking at a weekly accumulation of $105 million on June 9, the amount of DOGE bought from the market has been steadily declining. Bulls accumulated $5.5 million worth of DOGE on June 30, bringing the total accumulation over the past week to $49.16 million.
Yet, the drop in the Long/Short Ratio indicates waning investor interest in DOGE, possibly due to the token's weak performance. If the decline materializes, unrealized losses would flip into gains for short sellers.
It's important to note that these are critical liquidation zones for long positions, and if hit, unrealized short losses would become realized gains. The ratio of unrealized losses to profits was 26:1, indicating that for every winning trade, 26 were losing [1].
In conclusion, short traders' conviction is based on technical indicators and market dynamics suggesting that DOGE’s price will fall further, enabling them to eventually profit despite currently holding large paper losses [1][2]. The Liquidity Heatmap shows stacked clusters below $0.165, acting like a gravitational pull for DOGE, potentially causing the price to test $0.162 or even slide to $0.159 if the price drifts towards these zones.
- Short traders are increasingly investing in Bitcoin, Dogecoin, and other cryptocurrencies, capitalizing on the persistent bearish outlook in the crypto finance market, hoping to profit from further price drops, such as the potential slide towards critical liquidation zones like $0.162 and $0.159 as indicated by the Liquidity Heatmap.
- The crypto market dynamics and technical indicators, like the Liquidation Heatmap and the falling Long/Short Ratio, have led some investors to favor short positions in Bitcoin, Dogecoin, and other cryptocurrencies, reasoning that these tokens' weak performance will drive their prices lower, turning their current unrealized losses into realized profits.
- Amidst the continued bearish sentiment and significant unrealized losses, some crypto investors are diversifying their portfolio by including cryptocurrencies like Bitcoin, Dogecoin, and others, as they anticipate a broader correction in the crypto finance market, viewing it as a chance to buy at lower prices and long-term profit from their investments.
