coindesk.com
There are striking similarities between DOGE's price action today and in late 2020.
The so-called fractal is noteworthy as dogecoin surged over 1,000% in early 2021.
One key principle of the Dow Theory is that asset price trends are self-repeating, functioning along Mark Twain's famous quote: "History never repeats itself, but often rhymes." Hence, traders often check if the ongoing price action resembles anything from the past to understand what lies ahead.
Dogecoin, the world's largest meme cryptocurrency, has recently risen above the widely tracked 50, 100, and 200-week simple moving averages of its price, ending a prolonged 20-month consolidation at bear market depths. The 50-week SMA has moved above the 100-week SMA, signaling a bullish shift in momentum.
Both developments are strikingly similar to those in late 2020. The so-called fractal is noteworthy because DOGE witnessed an explosive rally in the first five months of 2021.
Doge spent 20 months in the depths of the bear market, between 5 and 15 cents, before breaking higher from the range late last month.
A similar 20-month bear market consolidation through the second half of 2019 and 2020 set the stage for a big rally in early 2021. Back then, the cryptocurrency chalked out 3,600% surge to 37 cents by May 2021.
So, if the 2019-20 fractal is a guide, DOGE's path of least resistance could be on the higher side. A closer look at the chart shows that DOGE's uptrends are sharp but rarely last more than six months. Meanwhile, the subsequent crash and the bottoming/consolidation process take nearly three years.
Another similarity between now and 2020 is that major central banks, including the Federal Reserve, are widely expected to cut interest rates in the coming months. The expectations for renewed liquidity easing bodes well for assets far out on the risk curve. In 2020, central banks worldwide had rates pinned near zero.
Still, past data is no guarantee of future results, especially with non-serious cryptocurrencies like DOGE and other memecoins. A potential bearish turnaround in bitcoin, the crypto market leader, could single-handedly drag DOGE lower.