Dogecoin's decline continues amidst a dominance of risk-averse sentiment across the cryptocurrency market.
The DOGE derivatives market remains weak amid a decline in open interest in futures and perpetual funding rates.
The MACD indicator on the daily chart is rising, suggesting a potential reversal if investors buy the dip.
Dogecoin continues to hold support at $0.13 as of the time of writing this report on Tuesday, with upward pressures continuing to spread across the cryptocurrency market. The largest meme coin by market capitalization faces a deteriorating technical structure, burdened by a weak derivatives market.
The Dogecoin derivatives market remains silent
The Dogecoin derivatives market has remained significantly compressed since the collapse on October 10, which led to a substantial reduction in leverage. According to Glassnode data, the open interest for futures (OI) across all exchanges was around $645,000 as of Monday, a slight increase from around $640,000 the day before but far below the $1.5 billion recorded on October 10.
Dogecoin's open interest reached a record level of around $3 billion on September 13, highlighting the significant decline in traders' interest and confidence. Compressed open interest indicates that traders are unwilling to take risks, a condition that continues to restrict rebounds.
The benefits of Dogecoin futures | Source: Glassnode
The perpetual funding rate for contracts $DOGE continues to fluctuate, depriving the meme coin of the tailwinds needed to maintain its recovery. According to Glassnode data, the funding rate is silent at zero as of Monday, down from 0.001% the previous day and 0.007% on Sunday.
The negative funding rate indicates that traders are leaning towards short positions, which helps keep the price down. While the positive but low funding rate suggests that fewer traders are increasing their exposure to the meme coin. On the other hand, a rising funding rate would support the bullish outlook and increase the odds of a continued upward trend.
The perpetual funding rate for Dogecoin futures | Source: Glassnode
Technical Forecast: Dogecoin is trading sideways and under pressure
is trading$DOGE above $0.13 at the time of writing this report on Tuesday. The meme coin is holding levels below the 50-day exponential moving average at $0.15, the 100-day exponential moving average at $0.17, and the 200-day exponential moving average at $0.19, highlighting a bearish setup.
The Relative Strength Index (RSI) stands at 41, below the midpoint line on the daily chart, emphasizing constrained buying interest. If the RSI drops further towards the oversold territory, the path of least resistance will remain downward, increasing the chances of DOGE retesting support at $0.12.
The daily chart for DOGE/USD
However, a bullish crossover is showing as the MACD line rises above the signal line on the same chart. The green bars in the histogram have turned slightly positive above the mean line, indicating an improvement in momentum.
However, a sustained breakout above the resistance of $0.15 could pave the way towards the 100-day exponential moving average at $0.17. Failing to reclaim that obstacle would keep the bears in control below the 200-day exponential moving average at $0.19. Meanwhile, the Average Directional Index (ADX) continues to fade at 36, indicating weakening trend strength and a consolidation tone until a clear breakout occurs.
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