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Marcel Pechman
6 hours ago


DOGECOIN FUTURES OPEN INTEREST HITS ALL-TIME HIGH — IS IT A TOP SIGNAL FOR DOGE?

The DOGE price top could be in, despite constant endorsements from Elon Musk and
the general outperformance from most memecoins.

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Dogecoin DOGE $0.4054 futures open interest surged to an all-time high of $4.6
billion on Nov. 23, eclipsing the previous record by 100%. This escalation
indicates a significant increase in leverage demand and is notable since DOGE
was trading 35% below its peak of $0.74 from May 2021.

Traders are concerned that the 224% rally in DOGE from Nov. 3 to Nov. 23, driven
by derivatives, might signify a cycle top, reminiscent of the price action seen
in April 2024.

DOGE open interest (green) vs. DOGE/USD. Source: CoinGlass

From March 20 and March 28, DOGE experienced an 82% price surge, reaching a high
of $0.23 as its futures open interest peaked at $2.3 billion. The overleveraged
long positions led to significant forced liquidations when DOGE corrected by
more than 15% within five days. The correction persisted for three weeks, with
the price declining by 40% to $0.14 by April 19.


DOGE LEVERAGE DEMAND AND ELON MUSK’S INFLUENCE

To assess if the recent surge in DOGE open interest signals a similar risk, it's
crucial to examine the funding rate of perpetual contracts. In the derivatives
market, long (buyers) and short (sellers) positions are constantly matched, but
the leverage demand fluctuates. A positive funding rate indicates that buyers
are compensating sellers to maintain their positions.

DOGE average 8-hour funding rate. Source: CoinGlass

Currently, the monthly cost to hold a leveraged long position in DOGE is about
2%, which falls within the 0.5% to 2.1% range considered neutral. The brief
spike to 7.5% on Nov. 23 isn't indicative of typical leverage costs, as the rate
resets every eight hours. Unlike some prior DOGE price surges, this recent
movement was predominantly fueled by spot market activity.

DOGE's 161% rally through Nov. 25 might look impressive at first glance, but in
comparative terms, it lagged behind peers like Stellar XLM $0.5061 , Cardano ADA
$0.9772 , and XRP XRP $1.44 .

DOGE/USD (blue) vs. XLM, ADA, XRP and MANA. Source: TradingView

It's uncertain whether the drivers behind the increased leverage demand for DOGE
positions are aligned with the notable gains in so-called "dinosaur coins," a
term some analysts use to describe the surge in value of altcoins that were
prominent before 2018.

For example, if Dogecoin's price surge is largely driven by Tesla and SpaceX CEO
Elon Musk's frequent posts about the newly elected Donald Trump's initiative
known as D.O.G.E., it's conceivable that Dogecoin could decouple from other
altcoins. This department, co-led by Elon Musk and Vivek Ramaswamy, aims to
enhance US government efficiency.

X social network post. Source: elonmusk

Given Dogecoin's history as a fun community-driven project, unlike the "dinosaur
coins" which aimed to revolutionize the world with blockchain technology, the
widespread popularity of its Shiba Inu mascot might propel Dogecoin's price
upward independently of other cryptocurrencies.

Regarding the sharp rise in DOGE open interest, as long as leverage remains
balanced, there's no immediate concern for cascading liquidations among traders.

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This article is for general information purposes and is not intended to be and
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 * #Dogecoin
 * #Cryptocurrencies
 * #Altcoin
 * #Government
 * #Markets
 * #Donald Trump
 * #Leverage
 * #Futures
 * #Elon Musk
 * #Market Analysis
 * #Memecoin


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