Dogecoin (DOGE) futures open interest surged to an all-time high of $4.6 billion on Nov. 23, eclipsing the previous record by 100%. This escalation indicates a significant increase in leverage demand and is notable since DOGE was trading 35% below its peak of $0.74 from May 2021.
Traders are concerned that the 224% rally in DOGE from Nov. 3 to Nov. 23, driven by derivatives, might signify a cycle top, reminiscent of the price action seen in April 2024.
DOGE open interest (green) vs. DOGE/USD. Source: CoinGlass
From March 20 and March 28, DOGE experienced an 82% price surge, reaching a high of $0.23 as its futures open interest peaked at $2.3 billion. The overleveraged long positions led to significant forced liquidations when DOGE corrected by more than 15% within five days. The correction persisted for three weeks, with the price declining by 40% to $0.14 by April 19.
DOGE leverage demand and Elon Musk’s influence
To assess if the recent surge in DOGE open interest signals a similar risk, it’s crucial to examine the funding rate of perpetual contracts. In the derivatives market, long (buyers) and short (sellers) positions are constantly matched, but the leverage demand fluctuates. A positive funding rate indicates that buyers are compensating sellers to maintain their positions.
DOGE average 8-hour funding rate. Source: CoinGlass
Currently, the monthly cost to hold a leveraged long position in DOGE is about 2%, which falls within the 0.5% to 2.1% range considered neutral. The brief spike to 7.5% on Nov. 23 isn’t indicative of typical leverage costs, as the rate resets every eight hours. Unlike some prior DOGE price surges, this recent movement was predominantly fueled by spot market activity.
DOGE’s 161% rally through Nov. 25 might look impressive at first glance, but in comparative terms, it lagged behind peers like Stellar (XLM), Cardano (ADA), and XRP (XRP).
DOGE/USD (blue) vs. XLM, ADA, XRP and MANA. Source: TradingView
It’s uncertain whether the drivers behind the increased leverage demand for DOGE positions are aligned with the notable gains in so-called “dinosaur coins,” a term some analysts use to describe…
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