Dogecoin: the rally of 31% was speculative, DOGE may drop below $0.20

The price of Dogecoin has surged by 31% over the past week amid market optimism. This has attracted investors' attention to DOGE.

It is unlikely that the DOGE rally will be sustainable, given its circumstances. The speculative nature of Dogecoin's growth warns of the possibility of a correction.

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The Dogecoin rally shows speculative signs

The current Network Value to Transaction ratio (NVT) for Dogecoin is higher than during the bull run in November 2024. This metric determines the under-/overvaluation of an asset at current price levels. High values are a bearish sign. They indicate that the price increase is not supported by an increase in transaction flow. Accordingly, this may indicate the asset is overheated and warn of the threat of correction.

In the case of DOGE, transaction activity is not balanced with network value. Such a rally will not be sustainable. This distinguishes it from the rally in November 2024, when the growth was supported by strong market fundamentals. The latest jump, however, lacks the necessary foundation.

In November 2024, the price surge of Dogecoin was accompanied by a significant transaction volume of ($10.27 billion at its peak). However, this week, despite a similar increase in value, the transaction volume with DOGE reached only $1.2 billion at its peak. This means that the recent growth was driven by speculative sentiment and a surge in hype, rather than strong fundamentals and long-term growth potential.

DOGE price needs to strengthen support

The popular meme coin has risen by 31% over the past week. At the time of writing, the price is holding above the key support level of $0.22. However, the speculative nature of the rally suggests that further growth is unlikely. Market conditions and a lack of sustainable demand increase the likelihood of a reversal.

Considering these factors, Dogecoin is vulnerable to a decline. If the price falls below $0.22, it is likely to head towards $0.19 or $0.18, losing psychological support at $0.20. This will confirm the bearish scenario and mark the end of the recent rally.

The only way to refute the bearish scenario is to bounce off the support level of $0.22. If the token rises above $0.24, it could restore investor confidence. However, market signals currently indicate more of a price correction than further growth.

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