Rapper Snoop Dogg and Kiss’ Gene Simmons both expressed their support for the ‘Doge Army’ this weekend alongside Tesla CEO Elon Musk. As a result, the price of the cryptocurrency rose again by 27% on February 7th. DOGE is the original crypto-currency of Dogecoin, which has become a household name in recent months.
So … it finally came … pic.twitter.com/Gf0Rg2QOaF
– Elon Musk (@elonmusk) 7 February 2021
Following the Gamestop and Robinhood saga, many traders stormed the cryptocurrency market. DOGE was the first cryptocurrency to see the fear of retail failure (FOMO), especially among members of the r / Wallstreetbets community.
“Yup. I bought even more Dogecoin,” Simmons wrote on February 6, continue:
Why? Because I believe it will go up. But it’s just me, ‘
Traders caution against DOGE rally
DOGE is commonly regarded as a meme cryptocurrency within the crypto market that started out as a joke. It does not have a use case, but does have an active community.
Therefore, when DOGE starts picking up due to an unexpected catalyst, such as the DOGE meme from Elon Musk or pump with a Wall / Wallstreetbets drive, it often sees an explosive rise in a short period of time.
Traders, however, insist that Dogecoin be handled. Donalt, a popular and pseudonymous cryptocurrency trader, said the amount of “normative shilling” around DOGE is unprecedented.
The trader emphasized that DOGE is not a favorable trade for the long term, and it will eventually decline, so traders should approach it with caution. He wrote:
‘The current DOGE situation is quite funny. Do not think we have seen this amount of norming in this space before, and it’s for our beloved silly DOGE coin of all things. Every other day another celeb comes out talking about DOGE. I see no reason to oppose it. That said, if you try to join DOGE in the long run, you give back everything you made. So sell portions on the way up or try to determine the top by determining how much steam is left in the normal tank. The purchase of DOGE should only be done with a view to selling. ”
When the r / Wallstreetbets action took place on January 29, the trading volume of DOGE Bitcoin on Binance briefly exceeded. This means that there is currently a lot of hype, which also suggests that a setback should not be a surprise.
There is a difference between DOGE now and then
During the DOGE price increase on January 29, the futures financing rate was highly negative. On average, the funding rate of a cryptocurrency depends on about 0.01%.
At the time, DOGE’s futures contract stood at around -0.1%. This meant that it was ten times lower than the average during that period.
The futures rate is a mechanism that encourages buyers or sellers based on the market balance. If there are more buyers in the market, sellers have to pay a fee every eight hours.
If the financing rate is negative, it means that sellers are paying buyers, and if the rate is positive, buyers are paying sellers.
Currently, the funding rate of DOGE is significantly above average, around 0.1%. This makes a long-term pressure likely, which can cause a short-term decline if there is a liquidation.