Dogecoin price rises by 20 percent, but experts warn of risks

Dogecoin (DOGE) is in a period of intense volatility. After a significant decline of around 45% from its peak in March, the coin has recently experienced a sharp increase in value, boosted by an upswing in the entire crypto market.

At the same time, a decline in open interest has raised concerns about the future prospects of this popular meme coin.

Rapid Drop in Open Interest for Dogecoin

Open interest refers to the number of contracts for financial assets such as shares, bonds or crypto options that have not yet been closed or settled. Recently, open interest for Dogecoin has fallen dramatically, according to data from blockchain analytics platform CoinGlass.

Within a week, it has fallen by 66.5%, from a high of $1.87 billion to around $600 million. This decline, which started in April, continued into May.

A decrease in open interest indicates a reduction in the total number of outstanding contracts for certain financial assets, which often indicates declining interest or involvement from traders and investors. Historically, a drop in open interest can cause downward price pressure on the asset in question, such as Dogecoin (DOGE) in this case.

If open interest for Dogecoin continues to decline, this could lead to major price drops. On the other hand, if open interest picks up again, this could indicate a possible price increase, especially if the price of Bitcoin (BTC) evolves favorably and interest among traders increases.

Well-known analyst remains positive about Dogecoin

Despite declining open interest and the concerns that come with it, crypto analyst Ali Martinez remains optimistic about Dogecoin’s long-term prospects. Martinez has identified a pattern known as the “descending triangle,” which is typically considered a bearish indicator.

However, according to Martinez, this pattern for Dogecoin may actually indicate an upcoming significant price increase, based on historical data. Moreover, Bitcoin’s declining dominance could create opportunities for Dogecoin and other altcoins.

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