Dogecoin (DOGE) is holding above a key support level after being locked in a downtrend for close to a month. The leading meme-coin fell to a two-month low below $0.07, triggering notable activity among a certain cohort of investors. Is this impact significant enough to initiate a sustained recovery?
On-Chain Metrics Support Dogecoin’s Upside
On-chain metrics or data refers to the nature and number of verified transactions that have been recorded on a blockchain. They are important to investors, traders and other market participants as they provide information that can be used to determine potential price movements.
One such metric is velocity which is used to show the rate at which the asset changes hands. High velocity is usually suggestive of an active user base. In the case of Dogecoin, the velocity has been significantly higher in the recent past.
According to data from Santiment, a market intelligence firm, the rate at which addresses exchange DOGE has increased 477% from 3.2 to 29.8 since May 11.
Dogecoin Velocity
Most of this movement could be attributed to activity among small wallet holders, which makes up the largest number of DOGE investors. This is shown by the Supply Distribution metric, also from Santiment, which revealed that addresses with a balance between 0.1 to 1 DOGE, 1 to 10 DOGE and 10 to 100 DOGE are three of the largest groups of addresses, collectively representing close to 2 million addresses.
According to the chart below, these sets of wallets have seen a significant increase in their balance, suggesting that they have been accumulating, collectively adding over 600,000 DOGE over the last week.
However, in regard to Dogecoin, this is relatively insignificant. The accumulation is worth a little over $42,000 and bears no impact on the price action whatsoever.
Dogecoin Supply Distribution
Any significant change in price can only be triggered when large transactions worth more than $100,000 observe fluctuation, as that would be a sign of whale activity.
Regarding what to expect from DOGE’s price action going forward, investors should observe some caution since clear signs of recovery are not apparent at the moment.
Dogecoin Price Hangs On A Cliff
After turning away from the April 3 four-month high at $0.1045, Dogecoin dropped more than 33% to set a swing low at $0.0694.
This downtrend saw DOGE lose key support levels including the $0.1 psychological level, the 50-, 100-, and 200-day Simple Moving Averages (SMAs), and the $0.073 major support level.
At the time of writing, Dogecoin was exchanging hands at $0.0722 and was fighting to hold above a key support level provided by the $0.070 psychological level.
A daily candlestick close above this level would mean that the buyers are aggressively defending this level. This would bolster the bulls to push DOGE higher to confront resistance from around $0.079 level, embraced by both the 50-day and 100-day SMAs.
A move higher could see the crypto shatter the 200-day SMA at $0.084 to reach $0,090 or return to the $0.1045 range high. This would represent a 44% uptick from the current price.
DOGE/USD Daily Chart
This positive outlook was supported by the ongoing recovery and upward facing Relative Strength Index (RSI). The Moving Average Convergence Divergence (MACD) indicator had also began facing northwards, an indication that buyers were re-entering the scene.
On the downside, these trend-following oscillating indicators were positioned in the negative region. The value of the RSI at 35 and of the MACD at -0.002 suggested that the market conditions still favored the downside.
As such, Dogecoin price could turn down from the current levels to drop below the $0.070 demand zone to tag the $0,0694 swing low.
A drop further could be detrimental to DOGE holders as this would trigger massive sell orders, occasioning a freefall to $0.05. This would represent a 30% drop from the current price.
