Dogecoin stays below $0.10 despite deflationary model

Important Points to Note

DOGE is currently down by 0.5% and is trading below the $0.10 mark.
The coin has been consolidating lately and there is a possibility of a potential rally in the near future.

Dogecoin (DOGE), the leading meme coin with a market cap of $14.27 billion, holds a significant position in the $2.49 trillion cryptocurrency market as of Wednesday.

Dogecoin’s Performance Despite a Disinflationary Model

Dogecoin advocates for its inflationary model, mentioning that inflation is expected to gradually decrease from 3.6% to 3.1% as the total supply of DOGE increases.

The premise behind this statement is the assumption that the demand for the meme coin will remain steady, supported by its strong community using DOGE for tipping, institutions launching DOGE-focused Exchange Traded Funds (ETFs), and its increasing utilization in Decentralized Finance (DeFi) services.

While the narrative suggests a stable demand, it may not ensure consistent upward pressure on DOGE’s price.

While Dogecoin’s fixed issuance model reduces inflation in relation to the expanding supply, it does not necessarily decrease the overall supply like deflation would. The continuous minting of 5 billion DOGE annually could pose a persistent downside risk, particularly during periods of low demand.

Dogecoin’s approach emphasizes practical usage as a currency rather than hoarding, and it encourages miners to secure the network. However, the ongoing supply pressure might limit the efficacy of this disinflationary model in the long run.

Moreover, institutional demand for Dogecoin remains subdued. Despite the introduction of DOGE spot ETFs on November 24, there have only been 15 days of inflows, amounting to a net asset value of $10.80 million. With 79 days showing no flows and two days with net outflows, institutional interest in DOGE remains constrained.

The Dogecoin Treasury currently holds slightly over 780.54 million DOGE, representing 0.51% of the total DOGE supply. Gaining additional institutional support is crucial for Dogecoin to advance into the global financial system, creating the demand needed to sustain the disinflationary model.

Potential Rally for DOGE Above $0.10 if Bulls Take Charge

The DOGE/USD 4-hour chart maintains a bearish stance despite the recent overall crypto market uptrend. Currently, DOGE is trading at $0.094 after being rejected at the $0.098 resistance level earlier in the week.

With the RSI at 55 above the neutral 50, indicating weakening bearish momentum, and the MACD lines above the zero mark, providing additional bullish sentiment, the outlook for the pair appears positive.