In the past week, Dogecoin experienced a significant 31% increase in price, grabbing the attention of many investors due to the overall positive market sentiment. The spike in value to $0.22 was propelled by optimism and speculative trading activity. Nevertheless, it is anticipated that this surge may not be sustainable in light of the circumstances surrounding its spike and the potential for a price correction.

Indications of a Reversal in Dogecoin's Speculative Rally

Comparing the current Network Value to Transactions (NVT) ratio for Dogecoin with that of the November 2024 bull market reveals a higher ratio now. A high NVT ratio signifies that the network's valuation surpasses its transactional activity, suggesting that speculative sentiment is the driving force behind the recent price surge rather than solid fundamentals.

Unlike previous bull runs where a high NVT ratio was accompanied by robust market fundamentals and substantial transaction activity, the current surge lacks a solid foundation, indicating that the recent price hike is fueled by short-term market excitement rather than long-term growth prospects.

Additionally, the recent rally of Dogecoin is characterized by a relatively low transaction volume, further reinforcing the speculative nature of the surge. Unlike in November 2024 when Dogecoin witnessed a substantial transaction volume of $10.27 billion at its peak, this time around, despite a similar increase in network value, the transaction volume peaked at only $1.2 billion.

The divergence between the escalating prices and steady transaction volume implies that the demand for Dogecoin is not keeping up with the price surge, hinting that the rally is more emotionally driven than based on genuine market interest.

Price Support Needed for Dogecoin

Having reached $0.22 following a 31% upsurge over the past week, Dogecoin's price sits above a key support level. However, the speculative nature of the recent surge suggests that continued upward movement is questionable. Given the prevailing market conditions and lack of substantial demand, the likelihood of a price reversal is heightened.

Considering these factors, Dogecoin is exposed to a potential decline. A drop below $0.22 could lead it toward $0.19 or $0.18, jeopardizing the psychological $0.20 support level, thus marking the end of the recent rally.

The bearish outlook could be negated only if Dogecoin's price rebounds from the $0.22 support level, with a recovery above $0.24 aiding in restoring investor confidence. However, current market signals suggest a probable price correction rather than further price gains.