Dogecoin (DOGE) is down 20% in the last 24 hours after a 100% rally on Friday. The ‘meme’ cryptocurrency still has a market cap of over $ 1 billion and has recorded $ 2 billion in trading volume in the past day.
Dogecoin started rallying a few weeks ago after Elon Musk, CEO of Tesla and SpaceX, reminded the market of the asset. Despite the latest correction, DOGE is still up 100% over the past two weeks.
DOGE’s continuous correction comes in despite its overall strength altcoin market. For example, Ethereum is up 35% against the US dollar in the last 24 hours as capital cycles from BTC to altcoins. Bitcoin Cash and Litecoin are also on the rise.
Here are a few reasons why DOGE may decline despite the widespread outperformance of altcoins.
# 1: Dogecoin has been a high beta version of Bitcoin
For the past several weeks, Dogecoin has been trading like a high beta bitcoin game. That is to say, it trades similarly to BTC, but with more overall volatility.
When BTC rose around 10% on Friday, DOGE had experienced a 100% gain. While the correlation isn’t perfect, it has continued to this day.
Bitcoin is down 7.5% in the past 24 hours, while DOGE has lost 22.5% of yesterday’s value.
This chart shows how the value of DOGE correlates with Bitcoin, but shows more volatility over time. However, this volatility has increased dramatically in recent days, as shown explicitly in the chart.
This could continue for the foreseeable future as long as there is a strong retail contingent in the Dogecoin market, which has long been the case. The market can also be relatively illiquid compared to other large cap altcoins.
Chart of DOGE's price action over the past month from TradingView.com
# 2: DOGE Market was bought
While Dogecoin’s rally was a long time coming, the market was soon overbought as the cryptocurrency gained 100% in a single trading day.
While there is no perfect measure of how much a market is being bought over, there are few markets where an asset that has appreciated 100% in a single trading session can rise the next.
Markets will undoubtedly retreat after overloads well above “normal” price regions.
It’s also likely that capital from Dogecoin has cycled to more attractive altcoins like Ethereum and Cardano.
DeFi altcoins have also performed extremely well in the past 24 hours.
For now, DOGE’s overall trajectory is likely determined by Bitcoin.
Related reading: 3 Bitcoin On-Chain Trends Show A Macro Bull Market Is Growing
Featured Image from Unsplash Chart from TradingView.com Price Tags: dogeusd, dogebtc Two Key Reasons Why Dogecoin (DOGE) Just Dove 20% Under $0.01