Dogecoin has been battered in the past 14 or so months, falling over 90% from 2021 highs above $0.76.
Competition from younger dog-inspired meme coin rivals and a worsening macroeconomic environment have weighed on DOGE/USD.
But the long-term technicals still look solid, if investors are willing to weather significant further near-term drawdowns.
It’s been an ugly 14 months for the crypto community’s favorite dog-inspired meme-coin Dogecoin. After hitting record highs above $0.76 in May of 2021, which at the time gave the cryptocurrency a market cap of close to $100 billion, DOGE/USD has fallen in all but three of the subsequent 14 months. Since its May 2021 record highs, Dogecoin has shed over 90% of its value and currently trades close to $0.055 with a market cap of just under $7.5 billion, despite securing listings on most notable crypto exchanges and receiving a constant stream of praise from the world’s richest man and eccentric billionaire Elon Musk.
Competition from Dogecoin wannabe competitor cryptocurrencies like Shiba Inu probably hasn’t helped Dogecoin’s cause. Shiba Inu’s market capitalization at one point even surpassed Dogecoin’s in October 2021 when it hit $54 billion. But SHIB/USD has since also come under severe pressure and currently has a market cap of around $4.5 billion.
Dogecoin Suffers As Macroeconomic Environment Worsens
The fall from grace for dog meme-inspired coins since their 2021 highs comes amid a severe drawdown across cryptocurrency markets with global economic and financial conditions have taken a severe turn for the worse since the end of last year. To put a long story short, inflation across most of the world has surged since this time last year, which central banks (like the US Federal Reserve) and reacting to by signaling a significant near-term rise in interest rates and reducing liquidity by ending QE and embarking on QT.
Tighter financial conditions force investors into less risk-sensitive assets and crypto meme coins are arguably as risky an investment as you can get. Compounding recent woes is the fact that inflation just won’t come down, with the war in Ukraine and recent lockdowns in China not helping, and this is feeding through into weaker economic growth. Indeed, many think the US economy might already be on the brink of or even in a recession. This is another reason why investors have been dumping risky assets like crypto (including Dogecoin) and stocks.
Long-term DOGE/USD Technicals Remain Robust
But Dogecoin lovers should not despair as the meme coin’s long-term technical outlook continues to look solid. Since its creation back in 2014, DOGE/USD has followed a consistent pattern of swinging exponentially higher every three/four years following a prolonged drawdown. This is best observed using a log chart as opposed to a traditional chart.
Indeed, in the latest upswing of 2021, Dogecoin broke out to the north of this long-term uptrend. It has since slipped back into its long-term trendline, with some bears eyeing a test of the 2018 highs just under $0.02 for later in 2022.
For DOGE/USD to advance substantially later this year or in 2023, there needs to be a drastic improvement in broad cryptocurrency market sentiment and that can only happen when the macroeconomic environment improves (I.e. inflation coming down, growth stabilizing/improving and central banks easing once again).
Most economists/analysts don’t know when this improvement will come, but sometime in 2023 is probably a good bet. The Fed easing off on rate hikes and even cutting rates slightly with inflation back under control could result in the return of demand for highly speculative assets like DOGE/USD.
Before you know it, Fear Of Missing Out (FOMO) might kick in, as it has with Dogecoin on so many occasions in the past. Any drawdown back to 2018 lows could set the stage for a longer-term rebound back towards the top of the long-term uptrend in the $0.50 cents region. A retest of 2021 highs sometime before 2025 remains a possibility. But would-be crypto investors should exercise caution before aping in, as the cryptocurrency could be in for substantially more downside in the near term.
This article was originally posted on FX Empire