The future interest rate of Dogecoin reaches an all-time high

The interest rate on Dogecoin (DOGE) futures contracts surged to an all-time high of 4.6 billion dollars on November 23, surpassing the previous record of 100%. This escalation demonstrates a significant and noteworthy increase in leverage demand, as DOGE has traded down more than 35% from its peak of $0.74 in May 2021. Traders are concerned that DOGE's 224% price increase from November 3 to November 23, driven by derivatives, may signal a cycle peak reminiscent of price developments in April 2024.

From March 20 to March 28, DOGE experienced an 82% price increase, reaching a high of $0.23 when open interest peaked at $2.3 billion. Overleveraged long positions led to significant liquidations as DOGE corrected over 15% in five days. The correction lasted for three weeks, with prices dropping 40% to $0.14 on April 19. DOGE drives demand and the influence of Elon Musk To assess whether the recent increase in DOGE open interest implies similar risks, it is important to consider the perpetual contract funding rate. In the derivatives market, long (buy) and short (sell) positions are constantly matched, but the leverage demand fluctuates. A positive funding rate indicates that buyers are compensating sellers to maintain their positions.

Currently, the monthly cost of holding a long position with leverage in DOGE is about 2%, within the range of 0.5% to 2.1% considered neutral. The sudden increase to 7.5% on November 23 is not a sign of the usual leverage cost, as this rate is reset every eight hours. Unlike some previous DOGE price increases, this recent move is mainly driven by spot market activity. The 161% price increase of DOGE as of November 25th seems impressive at first glance, but in comparison, it still lags behind other currencies like Stellar (XLM), Cardano (ADA), and XRP (XRP).

It is still uncertain whether the momentum driving the leverage demand for DOGE positions is related to the significant rise of the so-called "altcoin season," a term some analysts use to describe the increase in value of prominent altcoins before 2018. For example, if the price of Dogecoin rises primarily due to frequent posts by Tesla and SpaceX CEO Elon Musk about Donald Trump's new presidency, then Dogecoin may be able to separate from other altcoins. This is because Elon Musk and Vivek Ramaswamy are co-leaders aiming to improve the efficiency of the US government.

In terms of Dogecoin's history as an interesting community project, unlike the "dinosaur money" with the goal of revolutionizing the world through blockchain technology, the widespread popularity of the Shiba Inu mascot can drive up the price of Dogecoin without relying on other cryptocurrencies. Regarding the strong increase in DOGE open contracts, as long as the leverage remains balanced, there is no immediate concern about mass liquidation among traders.