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Look out below! Dogecoin risks another downtrend after testing a key support

Dogecoin (DOGE) is at risk of losing critical support if price falls off the ascending channel that has been trading for the past 53 days. While technical analysis is not an exact science, a daily close below $ 0.26 will likely invalidate the current move.

DOGE / USD rate at FTX. Source: TradingView

Aside from the Bitcoin (BTC) powered headwinds weighing down the DOGE price, the meme token has undergone a software upgrade this week and users have been encouraged to implement version 1.14.5. Two important security patches were affected: “Remote Code Execution in Dogecoin QT” (CVE-2021-3401) and “Sensitive Information Exposure on Unix platform” (CVE-2019-15947).

In the latest version, a new minimum charge recommendation has been finalized after reducing relay and mining outages in an earlier version. Other changes included Berkley DB and OpenSSL updates and SLIP44 compatibility for the HD wallet mismatch path.

Binance had problems after the upgrade

Although users and developers did not experience any setbacks from the changes, on November 11th, the Binance crypto exchange unexpectedly suspended all withdrawals from the Dogecoin network.

“Michilumin,” a Dogecoin core developer, stated that Binance had outstanding transactions for a couple of years due to insufficient fees. Despite the recommendations of the DOGE developers, the exchange was unable to redirect these dormant transactions to its own wallets.

Yes, we know with Binance. The situation is that, as a Dogecoin Tx years ago, Binance didn’t have enough fees; they just reissued those transactions (didn’t do RBF or anything) and assumed that the insufficient fee transactions would “get stuck” forever ….

– Michi Lumin (michilumin) November 11, 2021

When the 1.14.5 upgrade successfully lowered fees, these pending transactions were eventually  -proved by Binance without the knowledge.

Oddly enough, in February, Binance founder Changpeng Zhao voiced concerns that Dogecoin would be “centralized” and “abandoned”.

Some benefits / risks of #Doge.

Pros: Cool, fun, PR manager @elonmusk. Decentralized in the sense that there is no “core team”. It’s given up.

1 address holds 27% of all #DOGE.
The top 20 addresses hold more than 50% of all #DOGE
Somehow “centralized” in this sense.

– CZ Binance (@cz_binance) February 4, 2021

Futures markets may have fueled DOGE’s correction

Surely, the news of Binance’s withdrawal limit could be behind the recent price weakness at $ 0.25. However, it is also possible that the derivatives markets played an important role as Dogecoin’s open interest encountered major opposition.

Dogecoin futures aggregated open interest. Source: CoinGlass

In contrast to volume data, the open interest of futures contracts provides a better picture of the overall risk of investors. Regardless of the trading activity, which can temporarily decline after strong price movements, the open interest will remain high as long as the players keep their positions afloat.

DOGE / USD price on FTX, log scale. Source: TradingView

Notice how the previous four attempts to break the $ 1 billion open interest mark resulted in significant price corrections. Currently, the indicator stands at $ 850 million, so the imminent risk is in the past.

However, a positive price movement of 17% to USD 0.30 could possibly lead the DOGE derivative metric back to the feared open interest of USD 1 billion. There is also the option for traders to reopen their leverage positions and inflate the open interest regardless of the price change.

Hence, the classic chicken-and-egg problem stands before us: Was Binance’s emission the main cause of the recent crash below the 53-day ascending channel or did it have to h -pen due to excessive lever positions?

In any case, DOGE traders should keep a close eye on this derivatives indicator to avoid further surprises.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegr -h. Every investment and trading movement involves risks. You should do your own research when making a decision.

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