Dogecoin News: Memecoin Faces Sharp Downturn Following Twitter Logo Boost
Apr 10, 2023
Dogecoin news is spreading all over the internet. Last week, a popular cryptocurrency based on a meme experienced a price decrease of 3% within 24 hours. This followed a substantial 30% surge on the previous Tuesday when Twitter, owned by Elon Musk, changed its homepage logo to a Shiba Inu dog. Musk is a well-known supporter of cryptocurrencies, particularly Dogecoin. The memecoin, which features a Shiba Inu dog from the “Doge” internet meme as its symbol, has recently outperformed Bitcoin and other digital assets, ranking as the eighth-largest cryptocurrency by market capitalization.
The Twitter logo change was interpreted as a clear endorsement of Dogecoin by Musk, who has previously referred to himself as the “Dogefather” and influenced the cryptocurrency’s value through his comments on Twitter and television appearances. However, as the hype surrounding the logo update subsided, Dogecoin’s price declined, prompting concerns of a more significant correction in new Dogecoin news.
Crypto Derivatives Market Indicates Possible Violent Correction
The crypto derivatives market provides evidence of a potential deeper correction for Dogecoin. In this market, trades involving futures contracts constitute one of the most liquid markets in cryptocurrency, far surpassing trades in spot digital assets. Bullish bets on Dogecoin have increased, with the open interest, or the total value of outstanding contracts, in Dogecoin perpetual futures rising to nearly $600 million by Thursday, according to data provider Coinglass.
These bets are predominantly bullish, as indicated by the positive Dogecoin funding rate. Funding rates ensure that the spot Dogecoin news in price, traded on exchanges like Coinbase Global (COIN), aligns with the futures contract price. The funding rate becomes positive when the futures price surpasses the spot price, suggesting that most bets anticipate rising prices. Consequently, traders with these positions must pay money to those with short positions, promoting equilibrium in the futures market.
The high open interest and skewed funding rate for Dogecoin imply that the market is unbalanced, potentially leading to a violent correction if prices continue to move against bullish traders. Traders frequently use margins or borrowed money for these positions, which can result in forced closures by brokers if the market shifts against them in a process known as liquidation. This can also trigger automatic sell orders, further exacerbating the downward pressure on an already declining market.