Key takeaways
- DOGE is down 0.5% and continues to trade below the $0.10 psychological level.
- The coin has been consolidating and could rally higher in the near term.
Dogecoin (DOGE), the largest meme coin with a market capitalization of $14.27 billion, represents over 0.50% of the $2.49 trillion cryptocurrency market as of Wednesday.
Dogecoin underperforms despite a disinflationary model
Dogecoin defends its inflationary model, stating that inflation will decrease gradually to 3.1% from 3.6% as the total DOGE supply increases.
The assumption driving this claim is that demand for the meme coin will remain steady, supported by its robust community that uses DOGE for tipping, institutions launching DOGE-focused Exchange Traded Funds (ETFs), and its growing use in Decentralized Finance (DeFi) services.
While the narrative suggests a stable demand, it may not guarantee sustained positive pressure on DOGE’s price.
While Dogecoin’s fixed issuance model reduces inflation relative to the increasing supply, it does not necessarily reduce the overall supply, as deflation would. The continued minting of 5 billion DOGE per year could become a persistent downside risk, especially during periods of low demand.
Dogecoin’s strategy emphasizes practical usage as a currency rather than hoarding, and it incentivizes miners to secure the network. However, the ongoing supply pressure may limit the effectiveness of this disinflationary model in the long term.
In addition to this, institutional demand for DOgecoin remains muted. Since the launch of DOGE spot ETFs on November 24, there have been just 15 days of inflows, totaling a net asset value of $10.80 million. With 79 days showing no flows and two days with net outflows, institutional interest in DOGE remains limited.
The Dogecoin Treasury currently holds just over 780.54 million DOGE, which represents 0.51% of the total DOGE supply. Gaining further institutional support is key for Dogecoin to progress into the global financial system, providing the demand necessary to support the disinflationary model.
DOGE could rally above $0.10 if the bulls regain control
The DOGE/USD 4-hour chart remains bearish and efficient despite the broader crypto market rallying recently. At press time, DOGE is trading at $0.094 after rejecting at the $0.098 swing high earlier this week.
The RSI of 55 is above the neutral 50, indicating a fading bearish momentum. The MACD lines are also above the zero region, adding further bullish narrative to the pair.
If the bulls regain control, DOGE could surpass the $0.098 swing high and hit the $0.10 psychological level for the first time since March 16.
However, if the bearish correction persists, DOGE could retest the Sunday low of $0.09012 in the near term.
