The cryptocurrency market’s popular meme token, Dogecoin, is now seeing an increase in short-selling activity as interest in meme coins wanes. Data from Coinalyze shows that funding rates for Dogecoin have turned negative, indicating a bearish sentiment in the market. This negative trend has caused Dogecoin to lose 12% of its value in the past week, wiping out gains made since March.
In addition to the negative funding rates, Dogecoin’s open interest in futures contracts has also decreased significantly, from nearly $800 million to $611 million. This drop in open interest suggests a decrease in demand for the token. While Dogecoin’s funding rates briefly turned red in March, the current sustained negative trend is causing concern among traders.
The decline in Dogecoin’s value is reflective of the broader trend in the meme coin sector, where tokens have seen losses of up to 40% over the past week. Traders are increasingly moving away from riskier tokens like meme coins and turning towards more stable options like Bitcoin and stablecoins. Analysts warn that if Bitcoin prices continue to fall, meme coins are likely to see even larger losses in value.
Recent data also shows that Dogecoin futures traders experienced their worst day since May 2021, with $60 million in long positions liquidated. This is a higher liquidation amount than what was seen for Bitcoin futures during the same period. The overall decline in the cryptocurrency market can be attributed to various factors, including significant sell-offs by large holders of Bitcoin, outflows from exchange-traded funds, and the strengthening of the US dollar.
In conclusion, the rise in short-selling activity for Dogecoin and the broader decline in the meme coin sector indicate a shift in investor sentiment towards more stable assets. As the cryptocurrency market continues to be influenced by external factors like macroeconomic conditions and regulatory developments, traders are advised to exercise caution and diversify their portfolios accordingly.