SHIB price remains at risk of falling further against DOGE due to weak technicals.
Shiba Inu (SHIB) has grown stronger against its top “memecoin” rival Dogecoin (DOGE) in the last two months, in part due to the token’s periodic token burning events and a flurry of project announcements that promises to boost its utility.
Why is the SHIB price rallying?
In detail, SHIB/DOGE gained a little over 40% after bouncing from 0.0001120 on May 12, its lowest level on record.
SHIB/USD four-hour price chart. Source: TradingView
Coin burn is the most logical explanation behind SHIB’s recent rally against DOGE.
The process involves sending SHIB tokens to a wallet without a master, i.e., removing them out of circulation permanently against the total one quadrillion supply (half of which were sent to Ethereum’s co-founder Vitalik Buterin.
The Shiba Inu network has burnt more than 410 trillion SHIB tokens (~$4.5 billion at today’s price) from its initial supply, according to data tracking portal ShibBurn.com.
Shiba Inu supply. Source: ShibBurn.com
Dogecoin does not boast a coin burn feature and comes with an uncapped supply. That could give traders a reason to accumulate SHIB over DOGE, primarily during a crypto bear market when almost all digital assets fall against the U.S. dollar.
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As a result, SHIB’s losses against the U.S. dollar since May 12 stand around -7.5% versus DOGE’s 17.5% losses in the same period.
SHIB/USD versus DOGE/USD daily price chart. Source: TradingView
The Shiba Inu ecosystem grows
Shiba Inu’s launch came with a promise that it would be a better version of Dogecoin.
The project attempted so by offering some potential applications, such as smart contracts and an exclusive decentralized exchange called ShibaSwap that enables users to stake SHIB for “BONE” and “LEASH,” two other tokens within the Shiba Inu ecosystem.
ShibaSwap trading volume. Source: Nomics.com
On July 6, Shiba Inu’s pseudonymous developer Shytoshi Kusama (not to be confused with the blockchain project Kusama), teased followers with the launch of an “algorithmic stablecoin” called SHI, coupled with a reward token “TREAT” and a collectible card game for its metaverse.
On the other hand, Dogecoin has Elon Musk, the CEO of Tesla and SpaceX, who has already enabled DOGE payments at the companies’ online merchandise stores and is playing with the idea of doing the same on Twitter.
Earlier this week, Musk’s Boring Company also enabled Dogecoin payments for its Las Vegas transit system “Loop.”
What’s next for SHIB/DOGE
SHIB’s ongoing rally against DOGE risks exhaustion due to a classic bearish reversal pattern.
Notably, SHIB/DOGE has been fluctuating inside a rising wedge, defined by two ascending, converging trendlines. Rising wedges typically resolves after the price breaks below their lower trendlines, accompanied by a rise in trading volume.
In theory, the breakdown move could pull the price to the level whose length is equal to the maximum distance between the wedge’s upper and lower trendlines. The chart below shows SHIB/DOGE in a similar setup.
SHIB/DOGE daily price chart featuring ‘rising wedge’ breakdown setup. Source: TradingView
As a result, the pair risks falling to the 0.0001233-0.0001348 range depending on its breakdown point, a 15-20% drop from current price levels.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.