Data reveals that Dogecoin (DOGE) funding rates have started to flip negative, reflecting a move by traders away from riskier assets amidst low volatility in the broader crypto market.
Short Bets on Dogecoin Increase
Dogecoin, the largest meme token in the crypto market, is beginning to see an increase in short bets as the overall interest in the meme sector declines. This trend is causing concern among investors in meme tokens.
Funding Rates Indicate Bearish Sentiment
According to Coinalyze, Dogecoin’s funding rates turned negative on Tuesday, reaching -0.0027% by Thursday. These levels were last seen in October 2023. Funding rates are periodic payments between traders based on the price difference between futures and spot markets.
Decline in Dogecoin Price and Open Interest
While the negative funding rates are not exceptionally large, they signal a bearish market sentiment when they decline alongside a drop in prices. DOGE has lost 12% over the past week, wiping out all gains since March. Additionally, open interest in DOGE futures—representing the number of unsettled contracts—fell from nearly $800 million on Monday to $611 million on Thursday, indicating reduced demand for the token.
Broader Meme Coin Sector Losses
The negative sentiment extends across the meme coin sector, with tokens experiencing losses of up to 40% over the past seven days. Traders are moving away from riskier tokens like DOGE in favor of more stable assets such as Bitcoin and stablecoins.
“When the price of Bitcoin falls, meme coins tend not only to follow but to lose an even greater share of their value,” said Neil Roarty, an analyst at investment platform Stocklytics. “Any plans for a meme coin summer may have to be put on hold.”
Significant Losses for DOGE Futures Traders
Earlier this week, DOGE futures traders faced their worst day since May 2021, with $60 million in long positions liquidated—more than the liquidations seen in Bitcoin (BTC) futures. This downturn occurred as Bitcoin prices have suffered recently due to $2 billion in sales from large holders, net outflows from U.S.-listed exchange-traded funds (ETFs), and a strengthening U.S. dollar.
Conclusion
As Dogecoin funding rates turn negative and traders shift away from meme coins, the broader sector faces significant challenges. Investors are adopting a more cautious approach, favoring more stable and less volatile assets.
