- Dogecoin’s recent rally above $0.20 faces growing risks as 86 billion DOGE in profit and rising exchange balances signal potential sell-side pressure.
- While technical indicators remain bullish, analysts warn that a break below the 200-day EMA could trigger a deeper correction toward $0.14.
Dogecoin (DOGE), recently surged past the $0.2000 threshold which is infact an important psychological and technical level. However, despite bullish signals and a sharp 44% recovery, experts are cautioning that this rally may soon lose steam. Notably, a worst case scenario, the broader correction could be on the horizon.
Retail Hype and Rising Profit Supply Could Trigger a Pullback
Dogecoin is currently trading at $0.2060, having broken through $0.2000 with the help of growing retail interest, especially in the derivatives market. According to Glassnode data, the number of DOGE tokens in profit has climbed to 86 billion. While this surge in profitable holdings may appear positive, it introduces a key risk: sell-side pressure.
Historically, when the “supply in profit” metric rises sharply, many holders choose to take profits, especially those who bought in at lower prices. This behavior was seen in May when the number of DOGE in profit peaked at 121 billion, followed by a market correction. With more investors now sitting on gains, the temptation to cash out could disrupt Dogecoin’s uptrend.
Exchange Balances Point to Possible Selling Pressure
Another red flag is the increase in DOGE balances on exchanges. From mid-June to now, exchange wallets have added about 300 million DOGE, rising from 23.2 billion to 23.5 billion. Investors typically move tokens to exchanges when they intend to sell, suggesting that a significant number of traders could be preparing to liquidate positions.
Combined with the growing supply in profit, this trend strengthens the case for a possible downturn, especially if market sentiment shifts or Bitcoin faces volatility.
Technical Indicators Are Bullish: For Now
Despite the warnings, Dogecoin’s technical indicators remain optimistic. The price is holding above its 200-day Exponential Moving Average (EMA) at $0.2027, and the Relative Strength Index (RSI) is climbing near 65, signaling continued bullish momentum. Additionally, the Money Flow Index (MFI) indicates strong inflows, backing a risk-on environment for now.
However, the RSI nearing overbought territory (above 70) could mean a trend reversal is looming. If DOGE breaks below the 200-day EMA, a drop back toward $0.1429, June’s support level, is possible.
Derivatives Market Signals Bullish Sentiment
Open Interest (OI) in Dogecoin futures has grown significantly, from $1.64 billion in June to $2.67 billion today. This shows that traders are still optimistic about short-term gains. But high OI in overheated conditions can lead to sudden liquidations if prices fall sharply, amplifying downside risk.
While Dogecoin’s recent surge has energized the community, mounting selling pressure, rising exchange balances, and overbought technical conditions suggest that the current rally may soon stall. Investors should monitor the $0.2027 level closely—holding it could support a push to $0.3000, but a break below may lead to a deeper correction.
