Will Dogecoin's late 2020 come again?
Recent DOGE price action is strikingly similar to the action seen in late 2020, when the meme coin rebounded from a bear market and rallied over 1,000% in early 2021. As Dogecoin surged over 1,000% in early 2021, so-called fractals are worth noting.
A key tenet of the Dow Theory is that asset price trends are self-repeating, following Mark Twain's quote: "History never repeats itself, but it often rhymes." Therefore, traders often check if current price action is similar to the past to get a sense of what the future holds.
Dogecoin, the world's largest meme cryptocurrency, has recently risen above the widely followed 50, 100, and 200-week simple moving averages, ending a deep 20-month bear market consolidation. The 50-week moving average has crossed above the 100-week moving average, indicating a shift in bullish momentum. Both developments bear striking resemblance to what happened in late 2020. The so-called fractal is noteworthy because DOGE witnessed an explosive rally in the first five months of 2021.
Doge spent 20 months in the depths of a bear market, with prices ranging between 5 and 15 cents, before breaking out of that range late last month.
A similar 20-month bear market consolidation in the second half of 2019 and 2020 set the stage for a massive rally in early 2021. At that time, the cryptocurrency surged 3,600% to 37 cents by May 2021.
So if the 2019-20 fractal is a guide, DOGE’s path of least resistance may lie on the higher side. A closer look at the chart shows that DOGE’s uptrends have been dramatic but rarely lasted more than six months. Meanwhile, the subsequent crash and bottoming/consolidation process took nearly three years.
Another similarity between now and 2020 is that major central banks, including the Federal Reserve, are widely expected to cut interest rates in the coming months. Expectations for a new round of liquidity easing bode well for assets further out on the risk curve. In 2020, central banks around the world kept interest rates close to zero.
Nevertheless, past data is no guarantee of future results, especially for non-serious cryptocurrencies like DOGE and other memecoins.A potential bearish turn in cryptocurrency market leader Bitcoin could drag DOGE lower on its own.
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