On-chain data shows that Dogecoin (DOGE) is among the altcoins that have seen significant losses for 6-month traders, which could aid the coin’s price recovery.
Dogecoin MVRV suggests DOGE may be offering a buying window
In a new publish In X, on-chain analytics firm Santiment discussed how assets like Dogecoin and XRP (XRP) have performed in terms of trader returns over various time periods.
The relevance indicator here is the popular “Market value to realized value”(MVRV), which monitors the relationship between the value that investors in an asset as a whole hold (i.e., the market value) and the value they place on the asset (the limit realized).
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When the metric has a value above 1, investors are currently in a state of net unrealized profit. On the other hand, being below the cutoff implies loss dominance in the market.
Historically, whenever investors in a cryptocurrency have been in a state of high profits, it has become more likely that its price will spike, as the likelihood of a mass sell-off for profit-taking becomes significant in such conditions.
Similarly, asset price lows tend to occur when most investors are at a loss and sellers reach a state of exhaustion.
Based on these facts, Santiment developed a “Opportunity and danger zone model”, which looks at how medium-term versions of the MVRV have diverged from the norm for different sector currencies. Below is a chart of the model shared by the analyst firm.
The “medium-term” versions of the MVRV specifically target investors who bought within the 30-day, 90-day, and 6-month time frames. When the divergence of these metrics is positive for an asset, it means that the currency may be undervalued at this point in time. Similarly, a negative divergence suggests a potential overvalued status.
On the chart, it is visible that most altcoins are currently in the bullish region, with some of them even seeing their divergence surpassing level 1, corresponding to a region that Santiment classifies as the “Opportunity Zone”.
According to the analytics firm, Dogecoin, Toncoin (TON), and Ethereum (ETH) have seen their lowest 6-month MVRV values recently, with traders who bought them in the past six months sitting at 32%, 23%, and 22% losses, respectively. Interestingly, unlike these assets, XRP’s 6-month MVRV traders are making profits.
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“As a trader, if you like to take profits, you WANT to be in assets where other traders are suffering and seeing losses,” Santiment notes. Based on this, Dogecoin may offer the best window among the major coins, while XRP may be the worst option.
DOGE Price
At the time of writing, Dogecoin is trading around $0.0975, down over 3% in the past week.
Featured image of Dall-E, Santiment.net, chart from TradingView.com