Dogecoin futures open interest is at an all-time high – a major sign for DOGE?

Dogecoin (DOGE) futures open interest rose to $4.6 billion on November 23, surpassing the previous record by 100%. This surge indicates a significant increase in demand and is notable as DOGE has been trading 35% below its May 2021 peak of $0.74.

Traders are concerned that the 224% rally in the DOGE from November 3 to November 23, led by metaphors, could signal a cyclical peak reminiscent of the April 2024 price action.

Between March 20 and March 28, DOGE experienced an 82% price increase, with open interest on the futures rising by $2.3 billion and $0.23 higher. The overused long positions resulted in massive forced liquidations as DOGE corrected more than 15% in five days. The correction continued for three weeks and the price fell by 40% to $0.14 on April 19.

DOGE influences demand and Elon Musk.

To assess whether the increase in interest rates in DOGE represents a similar risk, it is important to examine the funding rate of perpetual contracts. In a dynamic market, long (buyers) and short (sellers) positions are constantly matched, but the demand for the stock fluctuates. A positive funding ratio indicates that buyers are compensating sellers to protect their positions.

Currently, the monthly cost of holding a long position used in DOGE is about 2%, which falls in the 0.5% to 2.1% range that is considered neutral. The brief spike to 7.5% on November 23rd does not reflect normal consumer spending, as the rate resets every eight hours. Unlike some previous DOGE price hikes, this latest move was mainly fueled by spot market activity.

DOGE's 161% rally through November 25 may seem impressive at first glance, but relatively speaking, it lags behind peers like Stellar (XLM), Cardano (ADA), and XRP (XRP).

To explain the rise in the price of altcoins that was highlighted before 2018, some analysts are not sure that the drivers behind the increased interest in DOGE positions are in line with the discoveries of the so-called “dinosaur coins”.

For example, if Dogecoin's price increase is largely due to Donald Trump's initiative called DOGE, which is frequently chosen by Tesla and SpaceX CEO Elon Musk, then it is conceivable that Dogecoin could be copied from other altcoins. Led by Elon Musk and Vivek Ramaswamy, the division aims to improve the efficiency of the US government.

Dogecoin's history as a fun community-driven project, unlike the “dinosaur coins” intended to revolutionize the world with blockchain technology, the widespread popularity of the Shiba Inu mascot could set Dogecoin apart from other cryptocurrencies.

As for the sharp increase in DOGE's open interest, as long as leverage is balanced, there is no immediate concern about dislodging liquidity between traders.

This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.