Dogecoin, the largest meme coin by market capitalisation, experienced a significant price drop over the past two days, retreating 6% to $0.3415 on January 8. This marks its lowest point in nearly a week. The decline coincided with a surge in trading activity, with $5.26 billion worth of tokens changing hands, up sharply from $3.3 billion the day prior.
The increased trading volume indicates heightened selling pressure as investors offloaded their positions, contributing to the downturn.
Mass Liquidations Amplify Market Volatility
The sharp decline in Dogecoin’s price triggered large-scale liquidations. Over $20 million worth of bullish positions were liquidated on Tuesday, followed by an additional $15 million on Wednesday—the highest levels since mid-December.
Such liquidations often exacerbate price declines as leveraged positions are automatically closed by exchanges. Additionally, Dogecoin’s weighted funding rate remained positive, a sign of reduced demand for long positions as traders adopt a more cautious outlook.
Market Sentiment Dampened by Broader Factors
The retreat in Dogecoin’s price aligns with broader crypto market challenges, including rising US bond yields, which have placed pressure on risk assets. Furthermore, optimism around regulatory approval for a Dogecoin exchange-traded fund (ETF) remains muted. Polymarket data shows the odds of the US Securities and Exchange Commission (SEC) approving a DOGE ETF this year dropped by 13% to just 36%.
Dogecoin price action is very similar to one year ago. In November 2023, $DOGE traded up, then dropped and consolidated before a major move up in 2024. In November 2024, Doge traded up higher, then dropped and is now consolidating. Next is a major move up in 2025. pic.twitter.com/QvMPxh7Bbw
— KrissPax (@krisspax) January 8, 2025
Despite these challenges, Bitcoin’s ongoing bullish trend offers hope. Analysts believe Bitcoin’s bullish pennant pattern could uplift the broader crypto market, potentially benefitting Dogecoin in the process.
Price Outlook: Can Dogecoin Rebound?
DOGE price chart
Dogecoin has declined significantly from its December high of $0.4830 to the current level of $0.3415. Despite the drop, it remains above key support levels, including the 38.2% Fibonacci retracement and the 50-day and 100-day moving averages. The Percentage Price Oscillator (PPO) has turned bullish, with its histogram staying above the zero line, signalling potential upward momentum.
Some analysts believe Dogecoin could rebound to its December high of $0.4830 in the first quarter, a 43.5% increase from current levels. However, a bearish scenario could see it slide further to $0.2630, the December 20 low.
