Dogecoin (DOGE) is up almost 100% so far this quarter (QTD) on hopes that Elon Musk will integrate the token on the Twitter platform. However, the potential for DOGE to continue its bullish trend in the coming weeks is low, argues a popular market analyst.
Short Dogecoin hard?
Independent market analyst GCR said it is moderately short DOGE based on its price’s recent reaction to a tweet from Musk. In particular, DOGE formed a local high at $0.158 on Nov. 1. Earlier that day, Musk shared a photo of his pet Shiba Inu wearing a Twitter logo T-shirt.
— Elon Musk (@elonmusk) November 1, 2022
GCR argues that the Musk effect is wearing off when it comes to the possible integration of Dogecoin into Twitter, meaning most of the gains are already priced in. Therefore, if the actual integration occurs, it is likely to become a news selling event.
dog stock only has 2 bullets
bullet 1 – musk tweeting/teasing about integration; already fired
bullet 2 – official integration into twitter; hasn’t shot, but would be selling the news
i’m moderate short on doggo, but leaving room open to short harder if they fire 2nd bullet
— GCR (@GCRClassic) November 3, 2022
the dog action only has 2 bullets
bullet 1 – musk tweeting/mocking about integration; has already been shot
bullet 2 – official twitter integration; It has not been shot, but it would be selling the news
I’m moderately short on doggo, but leaving room open to get shorter if they fire the second bullet
Overbought correction begins
Meanwhile, Dogecoin continued its correction move on Nov. 4, three days after reaching a high of $0.158.
DOGE price fell as low as $0.115 on Nov. 4, in part due to rumors that Twitter had put its cryptocurrency wallet development project on hold. This brought the token’s net percentage correction from the local high on Nov 1 to nearly 27%.
Furthermore, the downside move emerged due to its extreme overbought conditions with the highest relative strength index (RSI) since April 2021.
The correction has led Dogecoin price to retest its Dec 2021-May 2022 support (defined by the $0.108-$0.124 range – the red bar in the chart above) for a potential pullback. The coin could reach $0.185, a level that coincides with its 0.236 Fib line, if the recovery takes place.
Conversely, a break below the $0.108-$0.124 range could see DOGE drop to $0.055 as its main downside target, 55% below current price levels.
DOGE on-chain data
Additionally, Dogecoin on-chain data reveals a consistent drop in key metrics entering November, which could add further selling pressure.
For example, The Twitter-driven DOGE price rally coincided with a sharp rise in whale transaction counts (worth over $100,000), suggesting they supported the upside move. But after November 1, fewer whales have interacted with the Dogecoin network.
Meanwhile, the distribution of the Dogecoin supply in addresses containing between 1000 and 10 million DOGE tokens has fallen along with the price. On the contrary, the supply controlled by addresses holding more than 10 million DOGE tokens has increased modestly.
Additionally, addresses holding less than 100 DOGE have risen, indicating that retail investors have offset selling pressure from whales to some extent.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and operations involve risk, so you should do your own research when making a decision.
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.