Will Dogecoin replicate Bitcoin rally?

• Dogecoin failed to benefit from ongoing hype surrounding Bitcoin

• Transaction volume and social media sentiment remains subdued

• Potential network updates could potentially initiate bullish rally

Dogecoin benefited from yesterday's upbeat moods surrounding the launch of the first US bitcoin futures exchange-traded fund from ProShares and price surged 15% during the Monday session, outperforming nearly all major projects. At the moment half of the recent gains has been erased, but bulls show resilience in maintaining a stable trading range above the support at $ 0.20. Still it seems that despite the prevailing hype on Bitcoin, Dogecoin and a large part of the other major cryptocurrencies failed to capitalize on this phenomenon.

From a broader perspective, Dogecoin has been trading in a downward move since mid-August, while Bitcoin's price began to rapidly recover from the May sell-off initiated by Chinese authorities. This bearish outlook is partly driven by the recent surge in popularity of DOGE competitor Shiba Inu, which has rallied roughly 300% since mid-September. This sudden increase in Shiba popularity resulted in the migration of DOGE users which translated to small transaction volume and lower interest among social media users, which very often reflects the market sentiment towards a given cryptocurrency. 

Transaction volume decreased significantly from May highs and still did not managed to recover. Source: Coinmetrics via Messari

Social media sentiment towards Dogecoin cooled down in the recent months. Intotheblock via Coindesk

Still Dogecoin has exceeded Bitcoin, Ripple, Ethereum and Cardano in year-to-date returns, offering over 4500% gains since the beginning of 2021. Currently, many investors are wondering if this trend can continue in the near future given the growing competition in the cryptocurrency market. One of the factors that may lead to further price increases is the continued expansion of the network and the support of Elon Musk who recently expressed his backing for Billy Markus, the co-founder of Dogecoin, in his effort to allow community members to operate their individual nodes. Markus had stated that once DOGE nodes upgrade to 1.14.4, there will be a reduction in transaction fees on the Dogecoin network. Proponents expect fee reduction to boost DOGE utility and trigger a rally. Also developers are currently working on the Dogecoin-Ethereum bridge, however no launch date has been announced yet.

DOGECOIN – price broke above the downward trendline during yesterday’s session , however buyers failed to push the price above major resistance at $0.2800 which coincides with 38.2% Fibonacci retracement of the last upward wave and 200 SMA (red line). However, as long as the price sits above the support at $0,20 it is too early to talk about a bigger sell-off. Currently market sentiment remains upward and if buyers manage to break above the aforementioned $0.2800 handle the next resistance to watch can be found at $0,3080, where the next Fibonacci retracement is located. Source: xStation5