Why is Dogecoin down today?

Dogecoin (DOGE) is down 11.60% on the day, reaching $0.428 on December 9, after confirming a yearly high of $0.484.

Bitcoin caps the price of Dogecoin below $100,000

DOGE's decline coincided with broader weakness in the cryptocurrency market, with Bitcoin (BTC) falling back below the $100,000 threshold and Ether (ETH) struggling to maintain momentum above $4,000.

This triggered more than $445.25 million worth of crypto market liquidity in the last 24 hours, with longs and shorts worth $360.16 million and $85.08 million respectively.

Smaller altcoins – marked ‘other' in the image below – accounted for most liquidity.

Meanwhile, the Dogecoin futures market saw $25.42 million worth of liquidity, with longs around $21.98 million. The large liquidity shows that many traders were overly optimistic about the price of DOGE, expecting it to go higher.

As the broader market retreated, including Bitcoin, these traders were caught off guard, contributing to Dogecoin's price decline.

The DOGE drop follows bearish divergence signals

Dogecoin's continued price decline follows a multi-day bearish divergence as compared to the Relative Strength Index (RSI) comparison on the daily chart.

The difference is evident as the price of the DOGE has made consecutive higher highs since November 11th, and the RSI has reviewed lower highs at the same time.

In other words, DOGE's bullish momentum is losing strength, increasing the possibility of a reversal or consolidation phase.

Bearish divergence often precedes corrective action, and DOGE's price action reflects this. The RSI has dropped below 70—moving out of overbought territory—also indicating that buyers may be losing control in the short term.

Such technical methods often encourage traders to make profits, contributing to sales.

DOGE part of the strengthening trend

Additionally, the Dogecoin sell-off occurred after it tested the upper boundary of the current ascending channel pattern.

RELATED: Traders See DOGE, SUI, PEPE, and FTM Trading Bitcoin at $100K

Memecoin has risen above the channel resistance on several occasions in the short term, with bullish witches – long upper shadows on the candles – indicating the first stage of buying interest. However, deep corrections have occurred.

As of December 9, the bears see a further decline from the 20-day exponential moving average (20-day EMA, purple wave) to the downtrend of the channel around $0.410.

At $0.391 DOGE in December, the risk of colliding to the 0.236 Fibonacci retracement level has declined by 9.75% from current price levels.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.