Dogecoin price limps below a key support after Dogeday turns into a sell-the-news event

Dogecoin (DOGE) suffered a big blow on April 20, popularly known as “Dogeday,” thanks to the failed test launch of SpaceX’s Starship rocket and a downturn in the broader crypto market.

The SpaceX rocket, which featured the Dogecoin mascot on its side, disintegrated four minutes after its launch. Still, the company’s employees, including Elon Musk, cheered the failure as they expressed optimism for another test in the coming months.

The move comes on the heels of Musk’s recent stunt wherein he momentarily changed Twitter’s logo to the Dogecoin mascot.

The launch had built considerable excitement within the Dogecoin community. DogeDesigner, a graphic designer in the Dogecoin community, tweeted about the rocket launch with eagerness.

The launch of the biggest rocket of the planet, delayed for the sake of memes.

All Hail The Meme-lord!!!

— DogeDesigner (@cb_doge) April 18, 2023

However, Dogeday appears to have turned into a sell-the-news event, with the DOGE/USD pair losing 11.88% of the day’s high of $0.093 to drop to $0.083.

DOGE open interest remains elevated

Despite the drop in prices, the open interest (OI) volume for Dogecoin futures contracts is above the January 2023 high at $470 million, according to Coinglass data. OI volume represents the number of open positions in the futures market.

Dogecoin’s OI volume spiked to a yearly peak of $580 million on April 4 after Twitter changed its logo to a Shiba Inu, the breed of dog used to represent Dogecoin.

The DOGE/USD pair exhibited significant volatility following the logo change, rising over 21% to a new yearly peak of $0.10 on April 4. However, the price and IO volumes declined significantly after the social media platform returned to its original blue bird logo. The logo change was only active between April 4 to April 7.

A report from crypto analytics firm Kaiko noted:

“DOGE open interest has roughly doubled since Elon Musk took over Twitter last year, suggesting robust capital inflows.”

The OI volume for futures contracts dropped to $460 million following a wave of liquidations. However, the OI volumes picked up again to $533 million, leading up to the excitement around the rocket launch.

While the DOGE price dip caused widespread liquidations of around $104 million, the OI volumes are above the January 2023 highs, suggesting that the coin may experience more volatility.

The long-to-short ratio of the futures market shows a greater inclination toward short orders, acting as a contrarian signal for further upside.

At the same time, the funding rate for perpetual swap contracts has turned positive since the dip, raising the possibility of more downturn from a long squeeze.

DOGE price analysis

The supply distribution of DOGE whale addresses registered a spike, with addresses holding more than $10 million in DOGE accumulating quickly. However, these whales sold their DOGE immediately after Twitter changed its logo back.

These addresses repeated the same accumulation and distribution around Dogeday, selling heavily into the Dogeday decline.

The DOGE/USD pair has broken below the bullish parallel trend, raising concerns about further downside risk.

Based on the size of the parallel channel, the DOGE/USD projects a 15% decline from the present $0.083 level. A drop below of this magnitude will coincide with a DOGE support level of around $0.072.

The failed launch of SpaceX’s Starship rocket on Dogeday, coupled with the downturn in Bitcoin’s price, dealt a blow to DOGE price.

Despite this setback, the open interest volume for Dogecoin futures contracts remains elevated, indicating robust capital inflows. However, the recent dip in prices and increased selling by DOGE whales suggest further downside risks, with the DOGE/USD pair breaking below its bullish support.