Dogecoin saw a sharp 5% decrease in its value, hitting a low of $0.16192 on May 28. This drop was more severe than the broader cryptocurrency market, which fell by about 1.47% during the same timeframe. The dip in Dogecoin's value follows Bitcoin's 3.2% decline over the past 24 hours. Despite this, Dogecoin has seen significant gains, rising over 7.5% in the last month.

Reasons Behind Dogecoin’s Drop

The decline in Dogecoin’s price started between May 22 and May 26, and it is now trading 2.5% lower than it was a week ago. Data from Coinglass, a blockchain analysis platform, shows this drop aligns with a 37% decrease in open interest (OI) in futures contracts, from $1.67 billion in mid-April to $1.04 billion. The falling funding rates and open interest indicate a bearish outlook among investors, which might be driving the selling pressure on Dogecoin.

Dogecoin perpetual futures contracts’ funding rate also decreased from 0.0243% on May 23 to 0.0118% on May 28. Lower funding rates and reduced OI often signal a negative sentiment in the market, leading to more selling of DOGE.

Future Outlook for Dogecoin

The recent correction across the cryptocurrency market, which led to substantial liquidations, also impacted Dogecoin, driving its price down to $0.1512. There has been a notable increase in large transactions involving Dogecoin, particularly those over $100,000. According to IntoTheBlock, transactions worth between $100,000 and $1 million surged by over 28% last week, and transactions exceeding $1 million jumped by more than 55% in the past month. This activity suggests that large investors are cashing in on their gains, contributing to the ongoing price correction.

The latest drop in Dogecoin’s price was preceded by a bearish divergence between its price and the relative strength index (RSI) on the weekly chart. Even though Dogecoin's price rose from April 15 to May 28, the daily RSI showed lower levels, indicating a weakening upward trend and prompting traders to sell.

IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model indicates support for Dogecoin around $0.165 and resistance between $0.163 and $0.168. About 97,980 addresses bought approximately 7.03 billion DOGE within this range. Increased selling pressure from this level could push the price down further. The next significant support level is around the 50-day simple moving average at $0.10.

Conclusion

Dogecoin has experienced a notable price drop, driven by decreasing open interest and funding rates, as well as bearish signals in market sentiment. The increased activity from large investors suggests profit-taking, contributing to the correction. While there are support levels in place, continued selling pressure could further impact Dogecoin’s price in the short term.