Dogecoin has broken the general bearish trend of the crypto markets, with a sudden and rapid rally beginning on 29 August 2018. On 26 August, Dogecoin was stable near USD 0.0023 and by 1 September it hit USD 0.0066. This represents a 187% increase for Dogecoin’s price in less than a week. Daily trading volumes approached USD 200 million during this time, unprecedented levels for Dogecoin and an indication of the speculative frenzy that was surrounding Dogecoin.
Now this rally has broken and Dogecoin has dropped 25%, back to USD 0.005, and this market behavior has some characteristics of a classic pump and dump.
Bitcoin News first covered the Dogecoin rally on 31 August when its price was USD 0.0042, which represented a sharp 80% increase. Dogecoin rallied upwards another 100% after that article was written. This was likely because news of the Dogecoin rally was getting broadcast on all the crypto media sites around that time, generating a wave of speculation and investment.
Initially, the rally began due to the launching of Dogethereum, which is like Ethereum except it has the Dogecoin brand, and everyone who held Dogecoin received free Dogethereum. This creates a big incentive for users to use Dogethereum, to create Dogecoin-themed Dapps. The Dogecoin community has always been very active on Reddit, and now they are going into a frenzy to help each other and compete while building Dogecoin Dapps.
Even though the reason for this rally is legitimate, speculation took hold and ultimately has some characteristics of a classic pump and dump. Some whales then began to dump Dogecoin around the time it hit its peak, causing the rally to stall and slightly reverse, which caused other whales to dump their holdings. This is what caused the 25% downtrend, in combination with small-time investors panicking and selling once the price began to drop.
Dogecoin’s price is still over 100% higher than it was before the rally started, so it doesn’t appear this will be a full pump and dump where the price crashes back to below where the rally started.
This is a good illustration of the wild west nature of the crypto markets. In no other type of markets are such incredible gains seen followed by such a big crash in the same week. Crypto trading volatility is higher than the volatility in any other asset class, especially when dealing with alternative cryptocurrenciess like Dogecoin. Its market will likely see continued volatility in the coming weeks and months.
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