Majority of Dogecoin investors opt for buying (long) positions - Is the skewed market sustainable for continued growth?

Majority of Dogecoin investors opt for buying (long) positions - Is the skewed market sustainable for continued growth?

In a significant development, Dogecoin (DOGE) has broken through the $0.20 barrier, marking a notable rally that has caught the attention of traders and investors alike. This bullish momentum, however, comes with potential risks and factors that warrant close observation.

The heavy long positioning on Binance indicates a high degree of bullish conviction among traders, with 73.78% of traders betting on an upside and a Long/Short Ratio of 2.81, suggesting a heavy bullish bias. This bullish sentiment is further supported by the rise in Open Interest, which aligns with growing market confidence and a willingness to bet on higher prices for DOGE.

However, the momentum of DOGE is tightly linked to Bitcoin’s macro strength. Bitcoin’s rally above $120,000 has fueled risk-on appetite and helped push DOGE higher. If Bitcoin fails to maintain these highs, DOGE could quickly lose bullish momentum and retrace.

DOGE is stabilizing just below significant resistance around $0.20–$0.21. A confirmed daily close above $0.218 could validate the breakout, potentially triggering further upside toward $0.25–$0.27 or even $0.30 by year-end due to anticipated ETF approvals. Conversely, failure to hold $0.19–$0.20 support might lead to a retracement back to $0.17 or lower.

Momentum indicators like MACD and RSI currently show mixed signals—MACD momentum is flattening and RSI is near oversold territory, suggesting short-term range-bound volatility or pullbacks could occur before any sustained rally. The asset is also trading near its 200-day moving average, which remains a critical technical battleground.

An important proposal to reduce Dogecoin’s annual block rewards from 5 billion to 500 million DOGE could significantly reduce inflation and add a scarcity narrative akin to Bitcoin halving cycles. While this could bolster the long-term price, the proposal is still under discussion, and uncertainty around it can impact price action.

DOGE is forming an ascending broadening wedge, which can produce a parabolic breakout but also accompanies increased volatility and risk of sharp corrections if breakout attempts fail. On-chain data shows a $3.70 million net outflow of Dogecoin, indicating reduced selling pressure and possible confidence among long-term holders.

The rise in positive Funding Rates suggests that long traders are now dominant and willing to pay a premium to hold positions. However, the aggressive positioning in the Futures market can lead to volatile swings, especially if the market turns against overleveraged participants. Open Interest has risen sharply, up 14.03% to $3.12 billion, indicating a strong influx of capital into the Futures market.

In order for Dogecoin to avoid a rapid unwinding of overleveraged long positions, it must deliver sustained gains. The breakout was confirmed by a weekly close above the resistance level that has acted as a ceiling since December 2023. The continued rise in Open Interest and positive Funding Rates on Dogecoin Futures market aligns with growing market confidence.

Renewed enthusiasm from figures like Elon Musk and hopes for a DOGE ETF approval are key bullish narratives supporting the rally. However, these factors are sentiment-driven and susceptible to shifts due to regulatory changes or market news.

Close monitoring of these factors and volume confirmation is essential for assessing the sustainability of DOGE’s continued rally. For the breakout to gain credibility, DOGE must maintain its position above $0.19 and establish a new higher low. If it can do so, the bullish outlook for Dogecoin remains strong.

1. The heavy capital influx into the Dogecoin Futures market, as indicated by the rising Open Interest, suggests a growing confidence among investors.
2. The reduction of Dogecoin's annual block rewards, if approved, could potentially add a scarcity narrative akin to Bitcoin halving cycles, bolstering the long-term price.
3. The positive Funding Rates, indicating that long traders are willing to pay a premium to hold positions, highlight a strong bullish sentiment towards Dogecoin, although it is accompanied by potential risks from overleveraged participants in the Futures market.

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