Dogecoin’s 44% Increase Meets Resistance from Sellers with 86 Billion DOGE in Profits

Dogecoin experienced a significant increase in value recently, surpassing the crucial threshold of $0.2000. This surge in value, both psychologically and technically essential, has caught the attention of many investors. However, despite the positive signs and a notable 44% recovery, analysts are warning that this bullish trend might be short-lived. There is a growing concern among experts that a broader market correction could be on the horizon.

As of now, Dogecoin is trading at $0.2060, having broken through the $0.2000 barrier with the help of a surge in retail interest, particularly in the derivatives market. Data from Glassnode indicates that the number of DOGE tokens in profit has skyrocketed to 86 billion. While this may indicate a positive development, it also introduces a significant risk factor: potential sell-side pressure.

In the past, a sharp increase in the number of tokens in profit has often led to many holders cashing out their gains, especially those who entered the market at lower price points. This behavior was notably observed back in May when the number of DOGE tokens in profit peaked at 121 billion, which was followed by a correction in the market. With a larger number of investors now sitting on profits, the possibility of a mass sell-off looms over Dogecoin’s upward trajectory.

Additionally, the increasing balances of DOGE on exchanges are raising concerns. Over the past few weeks, exchange wallets have amassed around 300 million DOGE, climbing from 23.2 billion to 23.5 billion. Typically, investors tend to move their tokens to exchanges when they are contemplating selling them, indicating a growing number of traders gearing up to liquidate their positions.

When paired with the rising number of tokens in profit, this trend further bolsters the argument for a potential downturn, particularly if there is a shift in market sentiment or if Bitcoin faces increased volatility.

While the technical indicators for Dogecoin are currently positive, with the price holding steady above its 200-day Exponential Moving Average (EMA) and the Relative Strength Index (RSI) nearing 65, suggesting a continued bullish trend, the rising RSI towards the overbought territory could signal an impending reversal. If DOGE falls below the 200-day EMA, a retracement towards the support level of $0.1429 observed in June could be in the cards.

Dogecoin futures have seen a remarkable increase in Open Interest (OI), surging from $1.64 billion in June to $2.67 billion recently. This surge in OI indicates that traders are still optimistic about short-term gains. However, heightened OI levels in overheated market conditions can result in sudden liquidations if prices experience a sharp decline, heightening the potential downside risks.

Although the recent spike in Dogecoin’s value has generated excitement in the community, factors such as mounting sell-side pressure, the rise in exchange balances, and overbought technical conditions imply that the current rally might soon come to a halt. Investors are advised to closely monitor the $0.2027 level, as a sustained hold above this mark could pave the way for a push towards $0.3000. Conversely, a break below this level might trigger a more substantial correction in the near future.