Look out below! Dogecoin risks further downside after a key support is tested

Dogecoin (DOGE), which is a cryptocurrency, could lose critical support if it falls below the ascending channel that it has traded in over the past 53 days. Technical analysis is not a perfect science. A daily close below $0.26 would likely invalidate the current movement.

Price at FTX: DOGE/USD Source: TradingView

Apart from the Bitcoin-driven headwinds that are impacting DOGE’s price, this week saw a software upgrade of the meme token and users were asked to install version 1.14.5. CVE-2021-3401 and CVE-2019-1515947 included two important security patches: Remote Code Execution In DogecoinQT (CVE-2023-3341), and Sensitive Information Exposure On Unix Platforms (CVE-2023-15947).

After a reduction in relay and mining defaults, the latest release has a new minimum fees recommendation. Berkley DB updates, OpenSSL updates, and SLIP44 compatibility to the HD wallet deviation path were also made.

After the upgrade, Binance exchange experienced problems

Despite the fact that developers and users did not suffer any adverse effects from the changes on Nov. 11, Binance exchange abruptly stopped all Dogecoin network withdrawals.

@michilumin explained that Binance had pending transaction due to insufficient fees over a few years. Despite DOGE developers’ recommendations, the exchange did not redirect these dormant transactions into their wallets.

Binance is aware of this. Binance was aware of the situation years ago when Binance received insufficient fees. They just reissued those transactions (Didn’t do RBF or any other thing) and assumed that insufficient fee transactions would be’stuck’ forever ….
— Michi Lumin (@michilumin) November 11, 2021

Unbeknownst to Binance, the 1.14.5 upgrade resulted in lower fees.

Curiously, Binance founder CZ voiced concern in February about Dogecoin becoming “centralized” or “abandoned.”

There are pros and cons to #Doge. Pros: Cool, fun, PR manager @elonmusk. It is decentralized in that there is no “core team”. It’s abandoned. Risques: One address holds 27% all #DOGE. The top 20 addresses hold more than 50% of all #DOGE. This is a kind of “centralized” concept. “abandoned”.
CZ Binance (@cz_binance), February 4, 2021

DOGE’s correction could have been fueled by futures markets

Binance’s withdrawal restriction news could be responsible for the recent price decline to $0.25. It’s possible, however, that derivatives markets also played an important role because Dogecoin’s open interests were facing a significant resistance.

Dogecoin futures aggregate interest. Source: CoinGlass

Futures contract open interest gives investors a better view of their total risk exposure than volume data. Open interest is high regardless of trading activity. Players can temporarily lose their positions after price moves that are strong.

Price in DOGE/USD on FTX log scale. Source: TradingView

You can see that the 4 previous attempts to break $1 billion in futures open interest resulted a substantial price correction. The indicator currently stands at $850million, which suggests that there is no imminent risk.

A 17% price increase to $0.30 could bring DOGE derivatives back to the $1 billion open interest. The open interest could be inflated regardless of price changes by traders who may re-open their leverage positions.

The classic chicken and egg problem is now before us. Was Binance’s issue responsible for the recent drop below the 53-day ascending channel or was it inevitable due to excessive leverage?

To avoid any further surprises, DOGE traders need to keep an eye on the derivatives indicator.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.


Lillian Call

I am a technology and gaming writer by profession. I love NFT's and play to earn gaming such as Axie Infinity. I love writing about anything on the blockchain, especially gaming and entertainment. I often sing, write or draw to portray my feelings. When it comes to my free time or you can say ‘ME-TIME’, I love to play with my cat, sleep an extra hour, or play my favorite video games.