Rapper Snoop Dogg and Kiss’ Gene Simmons expressed support for the “Doge Army” over the weekend alongside Tesla CEO Elon Musk. As a result, the price of the cryptocurrency rose again by 27% on February 7. DOGE is Dogecoin’s native cryptocurrency, which has become a household name in recent months.
So … finally came to this … pic.twitter.com/Gf0Rg2QOaF
– Elon Musk (@elonmusk) February 7, 2021
After the Gamestop and Robinhood saga, many traders rushed to the cryptocurrency market. DOGE was the first cryptocurrency that saw the fear of losing (FOMO), especially among members of the r / Wallstreetbets community.
“Yes. I bought even more Dogecoin”, Simmons I wrote on February 6, continuing:
Why? Because I believe it will go up. But that’s just me, ”
Traders signal caution against rising DOGE
DOGE is normally considered a cryptocurrency meme in the crypto market that started out as a joke. It doesn’t have a use case, but it does have an active community around it.
Therefore, when DOGE starts to recover due to an unexpected catalyst, such as Elon Musk’s DOGE meme or the air powered bomb / Wallstreetbets, there is usually an explosive upward trend in a short period.
However, traders are asking for caution when dealing with Dogecoin. Donalt, a popular cryptocurrency trader and pseudonym, said the amount of “normie shilling” around DOGE is unprecedented.
The trader emphasized that DOGE for the long term is not a favorable trade, and will eventually fall, so traders need to approach it with caution. It I wrote:
“The current situation at DOGE is very funny. I don’t think we’ve seen that much normie shilling in this space before and it’s for our beloved DOGE coin silly of all things. Every other day, another celebrity comes out talking about DOGE. I see no reason to oppose trade. That said, if you are trying to join DOGE for a long time, you will return everything you did. So, sell partials on the way up or try timing the top, analyzing how much steam is left in the normie shill tank. Buying DOGE should only be done with the sale in mind. “
When the r / Wallstreetbets rally took place on January 29, DOGE’s trading volume briefly surpassed Bitcoin at Binance. This means that there is a lot of hype at the moment, which also suggests that a pullback should not be a surprise.
There is a difference between DOGE now and before
During the DOGE price hike on January 29, the rate of financing for futures was highly negative. On average, a cryptocurrency’s financing rate is around 0.01%.
At the time, the DOGE futures financing rate hovered around -0.1%. This means that it was 10 times lower than the average during that period.
The futures financing rate is a mechanism that encourages buyers or sellers based on market balance. If there are more buyers on the market, sellers will have to pay buyers a fee every eight hours.
If the financing rate is negative, it means that the sellers are paying the buyers and, if the rate is positive, the buyers are paying the sellers.
Currently, the DOGE financing rate is significantly above the average of around 0.1%. This makes a long squeeze likely, which can cause a short-term downturn if cascading liquidations occur.