Despite the current unprofitable position of Dogecoin (DOGE), some investors are considering buying the dip. However, this strategy carries significant risks.
According to a recent study by IntoTheBlock, the number of active transactions involving Dogecoin has greatly diminished over the past four months. In June, DOGE averaged over 2.1 million daily transactions, a figure that has since fallen sharply to below 38,000 daily transactions.
The cryptocurrency’s 7-day average for daily transactions now sits at 37.3k, a significant reduction from its June high of over 2.1M and a secondary spike of 616k in July.
The effect of this massive dip in Dogecoin transactions is evident in its performance. At the time of writing, the cryptocurrency’s press time price tag is $0.058, representing a 6% decrease in the last seven days.
Despite the dip, Dogecoin’s current support level has been tested and proven to be a strong price floor. This suggests a significant probability that the memecoin could see a resurgence of demand around the same level. The decline in transaction activity indicates that sell pressure has been subsiding, and the Mean Coin has been steadily rising within the last four weeks.
However, market indicators show signs of low excitement, with the Weighted Sentiment (yellow metric) near its lower monthly range, indicating a lack of bullish confidence at its current level. Other metrics, such as the Volume, also confirm the current low demand situation.
The recent downside has significantly impacted investor profitability. With a Market Value to Realized Value (MVRV) of -30.6%, the majority of DOGE holders are now in the red. The last time the MVRV ratio was this low was in October 2022, roughly 12 months ago.
The MVRV ratio suggests that the current level might be a worthy entry level for traders waiting for a recovery. However, it does not guarantee protection from more downside.
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