Dogecoin Renews Bearish Streak: Network Scaling Down?

On Jun 6, 2023

Last week, Elon Musk was accused of insider trading and price manipulation by investors in a Dogecoin lawsuit. In a recent filing in Manhattan federal court, investors asserted that Musk allegedly paid online influencers, appeared on SNL, and used Twitter posts to trade DOGE via several Dogecoin wallets that he or Tesla controlled profitably. This was apparently done at their expense.

Right after the pessimistic development pertaining to the ‘Dogefather’ was revealed, the bearish sentiment in the DOGE market intensified. Over the next couple of days, DOGE did attempt to make up for investor losses. However, it couldn’t pull off an extended leg up. The Binance lawsuit episode that unfurled over the past day made things worse for DOGE. In just a day, the top-meme coin shed more than 8% value. It was priced at $0.0666 at press time, making it one of the many undervalued coins currently.

Well, it wasn’t Elon Musk or the Binance episode that single-handedly instilled pessimism. Even before the aforementioned developments, DOGE had been gradually shedding value and was on a downtrend in the daily timeframe. In fact, the asset shares fairly high correlations of 0.9 and 0.72 with Bitcoin and Ethereum. This means the broader market sluggishness has rubbed off negatively on Dogecoin as well.

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Other trends in the Dogecoin market

The Dogecoin market has been characterized by insufficient momentum at this stage. The RSI has been hovering around neutral levels around 30, significantly below its SMA, justifying the same. At press time, sellers were seen in control of the Dogecoin market. The buyer-seller trade difference metric indicated that the number of tokens sold by sellers was higher than the number of tokens bought by buyers on all timeframes, making the case even worse for DOGE’s price.

Source: ITB

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Now, even though the prices of major assets have dropped over the past day, it should be noted that their on-chain performance has not essentially deteriorated. As chalked out in a recent article, both new and existing users on Ethereum have risen by 58% and 17% respectively over the past week. In fact, even Ripple’s network is expanding, for the number of new XRP addresses has been trending up lately.

Well, network growth is one of the most reliable predictors of price direction bias. Conventionally, a steady increase in the number of new and active addresses tends to translate into an upswing, and vice versa.

On Dogecoin, however, the trend is completely the opposite. The new addresses have dropped by more than 46% over the past week. The number of addresses active on the network, on the other hand, has depreciated by 22%. At press time, they flashed values of 12.72k and 48.37k, bringing to light that the network is scaling down, unlike its peers.