The Dogecoin (CCC:DOGE-USD) saga is so far one of the most interesting trading stories of 2021. DOGE soared to a new all-time high above 40 cents last week, and continued to captivate Wall Street with #DogeDay this week. However, the meteoric rise in Dogecoin prices coupled with the following selloff has many worried that the crypto is unsustainable. In fact, many are starting to wonder: Can I short Dogecoin?
The Dogecoin bubble began inflating seemingly out of nowhere. While crypto investors were, at the time, caught up in the hype behind the Coinbase (NASDAQ:COIN) direct listing, DOGE was gaining momentum. DOGE posted year-to-date gains of more than 5,000%, peaking at the 43-cent mark.
The rapid gains prompted the Dogecoin community to press for a new all-time high. On April 20, also known as #DogeDay, bulls were hoping to push the token past 50 cents. The holiday would wind up receiving the backing of multiple Twitter-savvy brands, as well as a listing on Webull.
But, alas, the token would not reach new heights. In fact, it took a nosedive, falling 25% from the 40-cent mark. DOGE is currently trading hands for just over 31 cents.
Should You Short Dogecoin as Dogecoin Prices Fall?
The rapid losses after the quick gains have lead many to believe the token is overvalued. This belief has catalyzed interest in leveraged coins like Dogebear (CCC:DOGEBEAR-USD). With Dogebear, investors can buy a coin that is positively charged by falling DOGE prices. Dogebear, which is available only on the FTX exchange and not to U.S. investors, is a 3x leverage short token. This means that if Dogecoin prices fall 10%, Dogebear prices rise 30%.
While shorting Dogecoin through these leveraged tokens is an option, it is a practice as volatile as the meme coin itself. Galaxy Digital Holdings (OTCMKTS:BRPHF) CEO Mike Novogratz is warning investors against shorting DOGE specifically. Novogratz says that although Dogecoin doesn’t have the security and appeal of Bitcoin (CCC:BTC-USD), consumer interest is far too high still, making shorting a risky move.
So, in brief, there are mechanisms that investors can utilize to short DOGE ahead of a potential downturn. However, the risk is significantly higher than going long in the currency.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.