Dogecoin May ‘Sit’ for a While Thanks to Shiba Inu and Market Pressure
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Dogecoin has competition in the form of the other dog inspired cryptocurrency of note. But Bitcoin is also exerting downward...
Given that Dogecoin (CCC:DOGE-USD) spiked upward in price on Oct. 28, investors are intrigued. Among the questions they hope to answer; what precipitated the movement, will it continue, and does it make sense to invest in the original dog-inspired token?
For pure traders, there’s a case to be made that Dogecoin is a worthwhile investment right now. Yet, for the more fundamentally based, conservative investor, the case is far less convincing. I’ve never been an advocate of Dogecoin because I fall into that latter camp, but that means little. It’s a simple personal preference.
Take that for what it’s worth and let’s get into what’s happening with DOGE.
Dogecoin Moving Up Quickly
By now, most crypto enthusiasts are aware that Dogecoin spiked by 44% on Oct. 28. This is interesting for a few key reasons. First, the jump in price was noteworthy from the perspective that Dogecoin has been relatively quiet for a few months.
There have been intraday spikes to be sure, but this is the largest over the past few months. The other interesting news relates to its rival, Shiba Inu (CCC:SHIB-USD). DOGE and SHIB are battling for position as measured by market capitalization.
The two tokens were battling neck and neck for the No. 8 and No. 9 market cap spots. Ultimately Shiba Inu has secured the No. 9 spot, for the time being at least. Dogecoin settled at No. 10 as Polkadot (CCC:DOT-USD) slid into the No. 8 spot.
For Dogecoin though, all is far from lost. Indeed, the positive news is that it eclipsed the $40 billion market cap threshold, however briefly. That is certain to garner it more and more attention for the time being.
What Precipitated the Jump?
In a word, the movement can be attributed to one thing: Rivalry. More specifically, crypto traders are playing Shiba Inu and Dogecoin off of one another. There is a clear inverse correlation which has emerged between the two.
Those traders are taking the profits which they made from Shiba Inu’s massive run up this year and pushing some of that capital back into DOGE. Zhu Su, who heads Arrow Capital, notes that the swap is easy and evident based on charts he posted on Twitter (NYSE:TWTR).
So, the price spike in Dogecoin derives its momentum from a rotation out of Shiba Inu as it remains overvalued — or perhaps overheated is the more appropriate word. But it also remains noteworthy that both are benefitting from Bitcoin’s (CCC:BTC-USD) resurgence over the past month.
It’s all good and well to note the correlation between Dogecoin’s price spikes and Shiba Inu, but that’s mostly looking backwards. Hindsight is 20/20 after all. What investors want to know is whether there is reason to believe DOGE should continue to move up.
In my opinion, Bitcoin will prove something of a bellwether.
Bitcoin Still Leads the Way
Bitcoin is still the granddaddy of the crypto market and as it goes so goes the broader market to a degree. Thus, any negative headwinds ought to result in trouble for Dogecoin.
That’s why I’d be hesitant with Dogecoin right now. There are signs that Bitcoin won’t have an easy time of it for the next month. Because following the bull run through the first two-thirds of October, Bitcoin is cooling.
The fear and greed index indicates that extreme bullish sentiment surrounding crypto has stalled out. There has been profit taking as Bitcoin owners sought to cash out on the extreme run up that began in late September. That has pulled prices down.
And major players in the futures market, notably the Chicago Mercantile Exchange, have “raised their bets against Bitcoin.” That will also serve to deter another rally to some degree.
This will trickle down to Dogecoin, exerting negative pressure at some point. I remain fundamentally unimpressed by Dogecoin as it still lacks utility. That’s why I always hesitate to recommend purchasing it.
But it also makes sense to avoid it as top down price pressure on Bitcoin bodes poorly for Dogecoin moving forward.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”
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