Dogecoin (DOGE) has once again captured the attention of market observers, particularly following a recent assessment by on-chain analytics firm Santiment which indicated a notable ‘blood in the streets’ scenario. As detailed in their research shared on January 8, various cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), and Dogecoin, are currently experiencing profoundly negative Market Value to Realized Value (MVRV) ratios.
“Average trading returns serve as a strong indicator of optimal trading timing, emphasizing the concept of ‘buying low’ versus ‘selling high,’” Santiment highlights. The firm’s metrics suggest that a number of digital assets are trading in oversold conditions.
Negative MVRV ratios often signify that investors who have engaged with a cryptocurrency are currently at a loss. Historically, these low points are considered advantageous for professional traders seeking to capitalize on market inefficiencies. As illustrated in Santiment’s findings, the MVRV ratios as of January 8 are as follows: Bitcoin at -3.73%, Ethereum at -7.71%, Cardano at -6.69%, and Dogecoin leading at -8.89%.
To break it down, MVRV effectively contrasts the market capitalization of a cryptocurrency against the holdings’ average cost basis (its Realized Value). A negative MVRV implies that an average holder is experiencing losses.
For Dogecoin, an MVRV of -8.89% indicates that investors who have purchased DOGE within the last month are facing considerable unrealized losses, more profound than those seen with Bitcoin’s -3.73%. While Ethereum (-7.71%) and Cardano (-6.69%) also remain in negative territory, their holders are positioned relatively better compared to those holding Dogecoin.
Given that DOGE has the most negative MVRV among the four analyzed cryptocurrencies, it presents a potential for recovery, should market conditions stabilize. However, it also signifies increased risk should the wider crypto sentiment remain precarious. As noted, traders frequently look for negative MVRV as a cue to ‘buy low,’ yet this does not assure immediate price appreciation.
Buy or Sell Dogecoin Now?
Santiment’s insights further underscore how macroeconomic factors have intensified the recent downturn in the crypto market. Notably, on January 7, U.S. bond yields surged—something that has historically shaken investor confidence—following strong economic data as the 10-year Treasury yield rose to 4.67%.
Market anxieties chiefly revolved around a higher-than-expected ISM Prices Paid Index indicative of inflationary pressures and a surprise increase in job openings. In light of tightening labor markets and potential inflation pressures, investors shifted towards risk-averse strategies that adversely impacted crypto assets.
“Crypto markets are sinking further, identifying short to midterm buying zones for many assets,” Santiment’s chart indicated. In this broader narrative, Dogecoin’s current slump aligns with prevailing market trends. If inflation concerns and yields continue to dominate discussions, we might see cautious capital flows into risk assets. Conversely, any indication of cooling inflation or a less restrictive Federal Reserve could trigger a rally, potentially amplified by the widespread negative MVRV ratios.
Nevertheless, these mixed signals create a complex trading landscape. On one hand, Santiment’s metrics suggest advantageous conditions historically for accumulation, particularly with DOGE at -8.89% MVRV. Conversely, macroeconomic uncertainties including Treasury yields and inflation data might obstruct any imminent recovery.
Santiment’s present outlook is cautious, advising, “Do not assume these opportunity zone signals will lead to an immediate turnaround. Yet, probabilities are leaning towards at least a short to midterm recovery for cryptocurrencies if external economic or geopolitical factors don’t impede progress.”
As of this writing, DOGE is priced at $0.33.
