Dogecoin (DOGE), the leading memecoin in terms of market capitalization, has skyrocketed 95% in the past week. However, this surge has also coincided with a record-breaking $1.4 billion in open interest on Dogecoin futures, raising concerns about excessive optimism among traders.
Some analysts believe that Dogecoin is a crucial player in altcoin bull runs, citing its historical performance and position as a top-10 cryptocurrency by market capitalization. Additionally, technical analysts point to similarities between the current price action and past periods of explosive growth for DOGE.
However, the unprecedented level of open interest in Dogecoin futures suggests excessive leverage as traders speculate on potential drastic price movement, as similar situations in the past have been followed by high volatility.
Analyzing the perpetual funding rate, a key indicator of leverage demand, reveals that DOGE futures are currently experiencing their highest funding rate in over 18 months. While this suggests bullish sentiment, it’s important to note that this metric alone doesn’t necessarily signify an unhealthy market. Furthermore, other major cryptocurrencies like Bitcoin and Solana are also experiencing elevated funding rates.
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