Dogecoin price increased 150% in 4 days. However, the altcoin is now in the most ‘overbought’ zone since April 2021. According to crypto analyst Yashu Gola, it is therefore possible to drop 60% by the end of the year. The analyst explains why.
Elon Musk has skyrocketed the altcoin price again
cryptocoin.com As you follow, Dogecoin recorded its biggest daily gain since April 2021. DOGE hit $0.146 on Oct. 29, up about 75%.
DOGE daily price chart / Source: TradingViewNotably, meme-coin’s massive intraday rally came as part of a broader uptrend that started earlier this week on October 25. In total, DOGE’s price rose 150% during the October 25-29 price rally.
The increase was accompanied by a good increase in daily trading volumes. According to Santiment, this coincided with an increase in the number of DOGE transactions by more than $100,000. Both indicators show a growing demand for Dogecoin tokens among wealthy investors or so-called ‘whales’.
Dogecoin whale transactions / Source: SantimentThe jump in Dogecoin’s benchmarks reflects investors’ excitement about Elon Musk’s October 27 acquisition of Twitter. Earlier this year, the billionaire entrepreneur flirted with the idea of making Dogecoin a payment method to purchase his Twitter Blue subscription. Meanwhile, Musk’s Tesla and SpaceX already accept DOGE payments for their products.
$DOGE, the official currency of Twitter.
— David Gokhshtein (@davidgokhshtein) October 28, 2022
Shiba Inu and meme coins follow DOGE
Another popular meme coin, Shiba Inu (SHIB), has also had a copycat rally. On October 29 alone, the price of SHIB rose 30% to $0.00001519. This is its highest level since August 2022. Like Dogecoin, Shiba Inu’s rally came as part of a broader uptrend that began on October 25. Since then, the altcoin price has risen 53%.
SHIB daily price chart / Source: TradingViewAdditionally, Dogelon Mars (ELON) rallied 140% during the period in question. Other meme coins have also made huge jumps.
Meme coins performance / Source: CoinMarketCapDogecoin is the most overbought since April 2021
However, according to a classic technical indicator, Dogecoin’s ongoing price rally is starting to look overly tense. The relative strength index (RSI), a momentum indicator that determines the degree of recent price changes to analyze overbought or oversold levels, has risen to 93.69 on the daily chart of Dogecoin. This is the highest level since April 2021, a month before DOGE hit a record high of $0.75.
DOGE daily price chart / Source: TradingViewTherefore, ‘overbought’ conditions do not necessarily imply an immediate downside reversal. However, they reflect the current enthusiastic buying momentum in the market. This causes the price to show a sideways or downward trend sooner or later.
Dogecoin’s 2018-2020 bear market on the weekly chart highlights similar price action. Notably, DOGE has dropped nearly 95% almost two years after hitting $0.0194 in January 2018. The altcoin correction period saw it trending within a descending channel. It broke out of the range upwards in July 2020. However, it followed the upward move with a horizontal consolidation trend between the 0 Fib line 0.0022 and the 0.236 Fib line 0.0054 until December 2020.
DOGE weekly price chart / Source: TradingViewBy comparison, Dogecoin’s ongoing bear market is shorter. However, as in the chart above, it shows a similar trend trajectory to the 2018-2020 period. Therefore, DOGE is likely to fluctuate within the current 0-0.236 Fib line range (or $0.055-0.176 range) following the descending channel breakout.
In other words, if the fractal goes as intended, DOGE is likely to correct towards $0.055 by the end of this year, down about 60% from current price levels. Conversely, if there is a sudden break above the 0.236 Fib line, $0.25 is likely as the next upside target.
