Dogecoin Struggles to Resume Uptrend Despite Renewal

Dogecoin has entered the spotlight once again as developers have released a new protocol upgrade. However, DOGE sits beneath a supply barrier that may prevent prices from rising. 

Preparing Dogecoin for Mass Adoption

The developers behind Dogecoin have realized that the cryptocurrency’s design must be further refined to live up to the bullish momentum it has seen since the beginning of the year. As such, a new version of the Dogecoin client Core has been released, offering critical performance improvements. 

According lead Dogecoin maintainer Ross Nicoll the upgrade is intended to keep the protocol operational and ready for the underlying token to be used as a form of payment. “People say it’s a joke coin, but we’re very careful to take care of the code,” he told Coindesk. “When it took off, there was a resurgence in attention and we want to keep the currency operational.”

Dogecoin Core 1.14.3 improves client synchronization speed, significantly reducing the time it takes for a node to upload blocks. The update also reduces default mempool caching time from 336 hours to 24 hours, aiming for no transaction to exist in the mempool “for more than a couple of minutes.”

DOGE Faces Stiff Resistance

While recent developments around Dogecoin have generated buzz in the cryptocurrency community, market participants do not seem interested in DOGE at the current price levels. 

The number of new daily addresses on joining the network plummeted by 50% over the past three weeks. Roughly 34,700 new Dogecoin addresses were created today, compared to the 69,000 new addresses that were created on Feb. 8.

The network’s ongoing contraction can be considered a pessimistic signal as it shows a decrease in user adoption over time. Network growth is often regarded as one of the most accurate price predictors; when a network shrinks for a prolonged period, prices tend to tumble.

Dogecoin Network Growth by IntoTheBlock

IntoTheBlock’s “In/Out of the Money Around Price” (IOMAP) model reveals that in the event of a correction, Dogecoin could retrace towards $0.0365 as there isn’t any significant support level below it.

Based on this on-chain metric, the only demand barrier that may impede this cryptocurrency from a steep correction sits around $0.0475. Here, more than 43,600 addresses had previously purchased over 1.45 million DOGE.

This critical demand barrier may keep falling prices at bay since holders within this range will likely do anything to prevent seeing their investments go “Out of the Money.” But if Dogecoin slices through this support wall, then a downswing to $0.0365 seems imminent. 

In/Out of the Money Around Price by IntoTheBlock

Conversely, the IOMAP cohorts show that it will be difficult for bulls to invalidate the short-term bearish outlook. Dogecoin currently sits underneath a massive resistance barrier as over 35,000 addresses bought nearly 9 billion DOGE between $0.0529 and $0.0542.

While the odds favor the bears, only a daily candlestick close above the $0.0536 hurdle could jeopardize the pessimistic scenario and lead to an upswing to $0.0668.

Disclosure: At the time of writing, this author held Bitcoin and Ethereum.