Dogecoin, the cryptocurrency made popular by meme culture and social media buzz, is breaking records as its derivatives market is bustling with activity. This week, Twitter replaced the blue bird logo with an image of a Shiba Inu, the source of Dogecoin's name, triggering a surge in trading of the token on derivatives exchange. According to Coinanlyze, open interest, or the number of unsettled contracts, on stablecoin-margined Dogecoin futures contracts rose to nearly 6 billion tokens, raking up to $600 million in unsettled positions. This set a new high when compared to the previous peak of 5 billion tokens, valued at $1 billion, in November 2021. Additionally, coin-margined Dogecoin contracts show $55 million in total open interest.

Stablecoin or fiat-margined futures offer a linear payoff, meaning the value of the collateral remains steady regardless of the market trend. In contrast, coin-margined contracts offer a non-linear payoff and are more prone to liquidations if the market performs poorly. As such, stablecoin-margined contracts are better suited for risk averse traders and hedgers, while coin-margined contracts thrive among aggressive traders, especially during bullish times. Open interest, or OI, is a measure of the trades opened by traders on financial derivatives tied to the underlying asset. It reflects the market strength behind a price trend and is a sign of greater volatility ahead, in contrast to a flat market. Funding rates, a fee paid by leverage traders to remain in a futures position, are positive on the cryptocurrency exchange, Binance, while on Bybit and OKX the rates swing from lows of -0.04% to highs of +0.02%. Positive rates hint at a bullish bias in the market with traders depending on sophisticated strategies for collecting these rates.

Despite the optimistic sentiment in the Dogecoin derivatives market, some express caution. Flowdesk Head of Trading, François Cluzeau, says long-term trend is not to be expected as the massive spike in Dogecoin prices in 2021 was soon after followed by a steep slump. He attributes this movement to an indirect effect that the tradings have on Bitcoin, which share prices tend to power theperformance of alternative tokens. Therefore, Cluzeau warns that what is driving the current surge might be difficult to sustain.



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