Dogecoin has been stuck in a price correction since March 31, falling by 21% from $0.2214. This has seen DOGE falling across a number of metrics, including the MVRV ratio. The MVRV ratio recently turned negative, a condition that indicates many holders are currently at a loss. This might sound bad, but it could actually be a massive buy opportunity for long-term investors of the meme cryptocurrency.
Dogecoin MVRV Ratio Turns Negative: Why Does This Matter?
Data has shown DOGE falling to the negative side of its MVRV ratio. According to price data provided by Santiment, an on-chain analytics company, DOGE’s MVRV ratio fell quickly to a low of 15.36% on April 4.
Source: Santiment
The MVRV ratio compares an asset’s market capitalization to its realized capitalization, giving insight into investor sentiment and the potential for price rallies. For DOGE, it divides Dogecoin’s current market cap by the realized value of all the coins in the market. At the time of writing, Dogecoin has a market cap of $24.9 billion. Although still the largest of all meme coins, Dogecoin’s market cap has fallen by almost 20% in the past seven days.
When the ratio turns negative, it often means investor sentiment has soured, and selling pressure is prevailing. However, it also indicates DOGE is trading at a discount relative to historical investment costs. For long-term investors, this can present a chance to buy DOGE at a price below its average realized price. On the other hand, very high positive DOGE MVRV ratios have often led to significant price pullbacks.
In the past, these periods of negative MVRV were followed by significant price rallies. Consequently, past action has seen DOGE go on a price recovery shortly after falling from the -5% to -15% range. The last time DOGE fell to -15% on the MVRV ratio was during a 31% price drop, which lasted from March 14 to March 20. During this period, the meme currency reached a value of $0.1251. However, the meme coin reversed course just shortly after and went on a 78% price surge over seven days to reach $0.2262 on March 28.
What’s Next For DOGE?
At the time of writing, DOGE is trading at $0.1738. Recent price action has seen the meme coin navigating a tight zone and a massive selling spree from whales. DOGE is now trading just above a support zone just above $0.17. A break of this price level to the downside could mean DOGE falling to as low as $0.125 again in the short term.
On the other hand, the end of the current market consolidation could reignite interest in DOGE and buying volume. As a result, the price could easily retest the $0.22 level.
DOGE price tests $0.17 resistance | Source: DOGEUSDT on Tradingview.com
Featured image from Inside Telecom, chart from Tradingview.com
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