Dogecoin Price Faces Drop Below $0.20 as 31% Rally Proves Speculative

Dogecoin’s price surged by 31% over the past week, attracting widespread investor attention owing to the broader market’s bullishness. The recent rally, driven by optimism and speculative trading, has led Dogecoin to trade at $0.22.

However, this upward movement is unlikely to be sustained, given the circumstances surrounding its rise and potential for a price correction.

Dogecoin’s Speculative Rally Signs Point to Reversal

The current Network Value to Transactions (NVT) ratio for Dogecoin is higher than it was during the November 2024 bull run. A high NVT ratio signals that the network valuation exceeds its transactional activity. This indicates that speculative emotions have driven the recent rally more than strong fundamentals.

While the NVT ratio was elevated during past bull runs, it now points to an unsustainable rally. Unlike the November 2024 bull run, when strong market fundamentals and substantial transactional activity supported the rise, this recent surge has lacked the necessary foundation. This indicates that Dogecoin’s current price spike is driven by short-term market hype rather than long-term growth potential.

Dogecoin NVT Ratio. Source: Glassnode

Dogecoin’s recent rally has also been characterized by relatively low transaction volume. This further supports the idea that this price surge is speculative. In November 2024, Dogecoin’s price spike was backed by a significant transaction volume of $10.27 billion at its highest. However, this week, despite a similar rise in network value, Dogecoin only saw $1.2 billion in transaction volume at its peak.

The disparity between rising prices and stagnant transaction volume shows that demand for Dogecoin is not keeping pace with its recent price increase. This mismatch further suggests that the rally is driven more by emotion than by solid market interest.

Dogecoin Transaction Volume. Source: Santiment

DOGE Price Needs To Cement Support

Dogecoin’s price currently sits at $0.22 after a 31% rise in the past week. While it holds above this key support level, the speculative nature of the rally suggests that it is unlikely to continue climbing. The market conditions and lack of solid demand increase the chances of a reversal.

Given the factors mentioned, Dogecoin is vulnerable to a price drop. If the price falls below $0.22, it is likely to head toward $0.19 or $0.18, potentially losing the psychological support of $0.20 in the process. This would confirm the bearish outlook and mark the end of the recent rally.

Dogecoin Price Analysis. Source: TradingView

The only scenario where the bearish thesis could be invalidated is if Dogecoin’s price manages to bounce off the $0.22 support level. A recovery above $0.24 would help restore investor confidence. However, for now, the market signals point to a price correction rather than further gains.