Rapper Snoop Dogg and Kiss’ Gene Simmons shared their support for the Doge Army with Elon Musk, CEO of Tesla, over the weekend. As a result, the price of the cryptocurrency rose again by 27% on February 7th. DOGE is Dogecoin’s native cryptocurrency that has become a household name in the past few months.
So … the time has finally come … pic.twitter.com/Gf0Rg2QOaF
– Elon Musk (@elonmusk) February 7, 2021
After the Gamestop and Robinhood sagas, many traders stormed into the cryptocurrency market. DOGE was the first cryptocurrency retailers were afraid of missing out on (FOMO), especially among members of the r / Wallstreetbets community.
“Yes. I bought some more Dogecoin,” wrote Simmons on February 6, continuing:
Why? Because I believe it will go up. But that’s just me ” DOGE / USDT 1-day candle price table (Binance). Source: TradingView.com
Dealers signal caution before the DOGE rally
DOGE is usually thought of as a meme cryptocurrency within the crypto market that started out as a joke. There is no use case, but there is an active community.
Often times, when DOGE begins to recover due to an unexpected catalyst like Elon Musk’s DOGE meme or a pump powered by ar / Wallstreetbets, there is an explosive upward trend in a short amount of time.
However, traders advise caution when dealing with Dogecoin. Donalt, a popular and pseudonymous cryptocurrency trader, said the amount of “Normie shillings” around DOGE was unprecedented.
The trader stressed that DOGE is not a cheap trade in the long run and will eventually fall so traders need to be careful. He wrote:
“The current DOGE situation is pretty funny. Don’t think we’ve seen that amount of Normie shillings in this room before, and it’s for our beloved silly DOGE coin of all people. Every other day a different celebrity comes out and talks about DOGE. I don’t see any reason to counter this. That said, if you try to get into DOGE for the long term, you’re giving back everything you’ve done. So sell cuts on the way up or try to pinpoint the top by analyzing how much vapor is left in the regular shill tank. Buying DOGE should only be done with a view to selling. “
When the rally r / Wallstreetbets took place on January 29th, the trading volume of DOGE Bitcoin on Binance briefly exceeded. This means there is a lot of hype going on right now, which also suggests that a pullback should come as no surprise.
There is a difference between DOGE now and before
During the DOGE price rally on January 29th, the futures funding rate was very negative. On average, the funding rate of a cryptocurrency is around 0.01%.
At this point in time, DOGE’s futures financing rate was around -0.1%. This meant that it was ten times below average over that period.
The futures funding rate is a mechanism that stimulates buyers or sellers based on market equilibrium. When there are more buyers in the market, sellers have to pay the buyers a fee every eight hours.
When the financing rate is negative, it means sellers are paying buyers, and when the rate is positive, buyers are paying sellers.
At the moment, DOGE’s financing rate is around 0.1%, well above the average. This makes a long pressure likely, which in the case of cascading liquidations can lead to a short-term decline.