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DOGE Liquidation

 

Optimism returned for the enduring altcoin Dogecoin, with prices slightly increasing into early 2024. This was driven by vocal billionaire backers, growing merchant adoption, and speculation of crypto recovery tailwinds benefiting the meme asset. 

However, a long liquidation spree struck DOGE in March 2024 - shedding light on underappreciated risks concentrated “whales” introduce.

In this article, you will understand the sudden DOGE dumping scenario, likely reemergence triggers, associated chart signals, and proactive tactics to defend your positions.

 

Breakdown of the DOGE Selling Activity

Throughout cryptocurrency history, heavy price slumps often resulted from massive position unwinding by “whales” - holders with enough supply to move markets during liquidations single-handedly. 

Early Bitcoin crashes saw large holders like the Mt Gox exchange forced to sell off coins to satisfy withdrawal liabilities - crushing developing BTC prices.

Similarly, in March 2024, abnormal selling pressure emerged in altcoin Dogecoin, with 30-50 million DOGE coins consistently exited per hour over extended days. 

The relentless high-volume dumping produced a brutal 55% price crash, retesting two-year lows under $0.05 before finally easing. 

The event underscored latent risks that disproportionately large whale holders introduce, capable of triggering catastrophic overnight drawdowns. This is despite Dogecoin’s strong real-world adoption, even as asset ownership remains severely tilted.

Crypto history shows acute risks when exchanges with whale-sized customer wallet balances face operational emergencies, though strict safeguards normally protect deposits. Even compliant venues cannot fully avoid liquidity events, forcing some degree of disadvantageous liquidations to satisfy obligations.

Without balanced ownership checking such concentrated power, crypto markets remain characterized by higher sentiment volatility. This requires prudent traders to incorporate planned drawdown expectations rather than ignore the possibility of sudden whale departures based on externalities. 

Find insights in this article: Cryptocurrency Staking - What You Need to Know

 

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What Could Spark Another Wave of Capitulation?

Speculation issues, technical constraints, or risk protocol violations force an abrupt DOGE balance reduction. 

Regardless of the catalyst, the development highlighted latent risks that whales with easy exit access introduce for underlying holders lacking similar scale or liquidity access.

Further whale dumping could remerge around developments like

  • Exogenous crypto shocks kindling risk-off selling
  • Retail traders capitulating should the bear market resume
  • Technical support breakdowns feeding momentum behaviour
  • Policy changes further strain exchange liquidity

With whales controlling majority ownership across most crypto projects rather than steadier institution allocation, fickle decisions loom, introducing correction risks for loyal holders unable to exit large positions quickly.

Take a look at this article: 6 Strategies To Manage Risk In Futures Trading

 

Chart Signals of Whale Liquidation

 

DOGE Liquidation

 

When major institutional traders and whales begin facing margin calls or tax-related selling pressures, their mass liquidations exhibit common chart patterns across different asset classes.

Carefully spotting these setups can warn retail traders before violent moves unfold. 

Some indicative markers include:

Prolonged Vertical Down Bars—Consistent heavy selling pressure over multiple days or weeks manifests visually as recurring long red candles with little to no intraday retracement. This demonstrates relentless momentum that is unlikely to diminish quickly.

Rally Failures at Resistance—Oversold bounces often materialize but are swiftly rejected at near-resistance levels instead of reclaiming bullish momentum. Such failures imply dip-buyers lack enough conviction and capital to absorb available shares, leaving room for declines to extend.

Volume Spikes Far Above Average—Finally, monitoring volume levels proves helpful in gauging the magnitude of moves. When 50-100% above average daily volumes persist, it confirms an abnormal exodus of shares resilient to half-hearted dips, likely from larger players liquidating or distributing holdings. 

The combination of heavy red candles, weak bounces, and spikes in volume sustained over a week or two tends to precede severe breakdowns as leveraged positions capitulate before tax-loss harvesting picks up year-end. 

While these patterns become more obvious in hindsight after 20% collapses, carefully spotting them unfold in real time allows retail traders to manage their own exposure prudently by taking profits or tightening stops. 

The signals always foreshadow intensifying institutional moves that are unlikely to reverse without fundamental changes.

Check out this suggested article: How to Decipher 16 Candlestick Patterns 

 

Reducing Exposure to Whale Herd Risks

While defences like protective options or tightening stops assist in navigating periods of intense whale liquidations, traders should also consider proactive strategic steps lowering reliance on crypto whale risks by

Researching Ownership Distributions

Carefully evaluate transparency tools, assessing ownership percentages held by the top 10-100 addresses on any blockchain. 

Higher network centralization in the hands of a few large holders flags assets likely over-exposed to mass liquidations versus flatter distributions, signalling less systemic vulnerability.

Selecting Assets Avoiding Whale Concentration
 

DOGE Liquidation

 

Similarly, comparing relative risk between cryptos before investing reduces the likelihood of being caught wrongfooted. 

Opting for emerging layer 1s and DeFi projects not yet dominated by institutional inflows provides some shelter versus the largest cap bellwethers, which are more closely tied to macro environment shifts.

Accepting Immature Market Attributes

Even while encouraging best practices, retail participants must acknowledge that crypto markets remain comparatively developing compared to traditional assets with regulatory oversight. 

This reality introduces amplified volatility from huge players entering and exiting positions en masse until infrastructure and transparent oversight mature. 

Setting expectations accordingly allows proactive planning around likely turbulence as the ecosystem progresses.

You might also like to read: 3 Most Effective Indicators for Crypto Trading

 

Final Analysis

As the DOGE liquidation event demonstrates, crypto markets remain vulnerable to severe drawdowns when whales hold concentrated supply and face external pressures that force a disadvantageous position to unwind. 

Learning to spot chart signals like heavy selling volumes, weak bounces, and prolonged dumping provides vital early warnings to defend positions ahead of intensifying moves. 

Combining defensive tactics with an understanding of whale risks allows enduring temporary volatility on the path toward a more balanced crypto ecosystem in the years ahead.

We encourage all crypto participants to study past liquidation catalysts deeply, chart signals foreshadowing moves, and both tactical and strategic precautions to implement. 

Anticipating these risks before they emerge gives retail traders their best chance at navigating adverse swings alongside crypto’s long-term adoption upside.

Learn and trade with markets.com: The ultimate trading community!

“When considering “CFDs” for trading and price predictions, remember that trading CFDs involves a significant risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be considered investment advice.” 

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