Dogecoin reaches new heights, but beware of falling!

Dogecoin is making headlines again. After a spectacular rise, the famous memecoin seems on the verge of reaching new heights, driven by the enthusiasm of crypto investors and the undeniable influence of Elon Musk. But behind this surge lies a crucial question: is this the calm before the storm?

An excessive craze for Dogecoin

Dogecoin, the memecoin par excellence, seems to have returned to its legendary popularity. Its futures open interest has reached an impressive record of $4.6 billion November 23rd.

This figure, doubling the previous peak, reveals spectacular enthusiasm. However, this frenzy is reminiscent of the speculative bubbles which often end up bursting.

This renewed interest coincides with a 224% increase in the price of the DOGE crypto between November 3 and 23, even though its value remains well below its historic peak of $0.74 reached in May 2021. Such This surge, fueled by derivative products, raises questions about the sustainability of this trend.

The history of Dogecoin teaches us that these periods of euphoria, where leverage is king, are often followed by brutal corrections.

A notable precedent can be found in March 2024: after an 82% increase, DOGE saw its price fall by 40% in a few weeks, leading to massive liquidations. This example highlights the dangers of excessive leverage, where quick wins give way to equally dazzling losses.

The Elon Musk effect and its limits

Elon Musk continues to play a major role in the price movement of Dogecoin. His tweets and initiatives, such as his involvement in government projects around DOGE, regularly fuel investor enthusiasm.

However, Dogecoin’s reliance on this influence raises a crucial question: can it thrive beyond the Musk effect of becoming the richest man in history?

At first glance, the current craze still seems linked to this support. Yet unlike previous price increases, the recent move appears to be driven more by the spot market, hinting at increased participation from traditional investors.

This could mark a step towards a certain maturity, but the signs of over-indebtedness persist.

The funding rate for perpetual contracts, which reflects the balance between buyers and sellers, remains relatively neutral at around 2%.

However, sporadic spikes, like that of 7.5% on November 23, show nervousness in the market. These fluctuations signal that leverage could quickly tip, triggering a cascade of liquidations.

Despite its recent performance, Dogecoin appears vulnerable to a possible correction. While the Musk effect continues to play a catalytic role, it does not guarantee long-term stability. Prudent traders know that record open interest, while impressive, often hides underlying risks. Meanwhile, Asia’s largest digital bank opens its doors to crypto trading.