Dogecoin (DOGE) has entered a minor correction phase following its impressive 48% rally earlier in October. As of October 23, the memecoin has dropped by over 9.5% from its recent high of $0.149, established just two days prior. DOGE is now trading at $0.135, its lowest price in a week, after a 6.5% decline in the last 24 hours.
This pullback appears to be driven by profit-taking and increased risk-off sentiment among investors, contributing to the selling pressure on the popular cryptocurrency.
Profit-Taking Follows Overbought Signal
DOGE’s price correction started after its daily relative strength index (RSI) crossed above 70, indicating an “overbought” condition. This technical signal often precedes periods of price correction or consolidation, as traders typically secure profits when they believe the price has reached a short-term peak. This pattern is consistent with previous instances when DOGE’s RSI entered the overbought zone, triggering price drops.
For example, Dogecoin experienced a 23.50% price drop in late September following a similar overbought signal.
Golden Cross Fractal and Its Impact on DOGE
Dogecoin’s ongoing price drop coincides with the prospect of its key exponential moving averages (EMA) forming a “golden cross.” This event occurs when an asset’s short-term moving average, such as the 50-day EMA, crosses above its long-term moving average, such as the 200-day EMA. The golden cross is typically considered a bullish signal, indicating the potential for a sustained uptrend.
However, in Dogecoin’s case, previous golden cross formations have been followed by significant price declines. For instance, after similar crossovers in November 2023 and December 2022, DOGE experienced price drops of 18.5% and 13.8%, respectively. This pattern seems to be repeating, as early buyers who anticipated the golden cross may be locking in profits, further contributing to the ongoing correction.
Should the selloff continue, DOGE’s downside target for November may be its moving averages, which currently stand at around $0.111.
Rising US Treasury Yields Add to Selling Pressure
Dogecoin’s recent price decline also aligns with a surge in US Treasury yields, which typically reflects improving economic conditions and lower recession risks. On October 23, the two-year Treasury yield climbed above 4%, its highest level in two months, while the 10-year Treasury yield reached a three-month peak at 4.24%.
As Treasury yields rise, the opportunity cost of holding riskier assets, such as cryptocurrencies, increases. This has led to downward pressure on DOGE and other speculative assets as investors shift towards safer, yield-bearing investments.
Outlook for DOGE
The combination of technical indicators like the overbought RSI and golden cross fractal, along with macroeconomic factors like rising US Treasury yields, has created a challenging environment for Dogecoin in the short term. Investors are locking in profits, while increased economic stability is reducing the appetite for riskier assets like memecoins.
If the selloff continues, DOGE could potentially test lower levels, with the moving averages near $0.111 serving as a key support target for November. However, as with any cryptocurrency, market sentiment and external factors can quickly shift, making future movements uncertain.
