Dogecoin price action optimism has been ballooning this week. Rising bullish expectations were driven by the expectation that a DOGE ETF approval may occur this month. However, these expectations also underscored some downside risks.
DOGE price sentiment improved considerably this week, aided by reports that an ETF approval might happen within the next few days. The ETF in question was filed by Rex Osprey earlier this year, and recent reports signaled a high likelihood that it will be approved in the coming week.
The probability of a Dogecoin ETF approval before the end of 2025 jumped from as low as 79% to 94% within the last 3 days.
A Dogecoin ETF approval would be a big deal for the meme coin. It would be the first in its category to receive an ETF, and this would no doubt pave the way for institutional adoption. However, that may not necessarily be the case initially.
Dogecoin Price Faces Risk Despite DOGE ETF Optimism
Heavy bullish expectations have historically underpinned every ETF launch. The DOGE ETF is no exception, but this trend highlights some downside risks for Dogecoin price.
Overexcitement, especially in the derivatives market, tends to attract too much optimism, which translates to heavily leveraged long positions. Such a scenario played out when Ethereum ETFs made their debut, after which the ETH price cooled off significantly, contrary to expectations.
Although not a guaranteed outcome, such a scenario could play out for the Dogecoin price. The memecoin’s funding rates bounced back from as low as -0.0010% earlier in the week to 0.0097% in the last 24 hours.
Dogecoin futures open interest hovered at $3.37 billion at the time of observation, CoinGlass data showed. This was only a slight uptick from its weekly low of around $3.25 billion, which was notably lower than levels observed in July, but still a significant improvement from its lows in June.
On-chain data revealed an overall bullish sentiment across the whale cohort. Whales acquired about $26 million worth of DOGE in the spot segment on Binance and OKX in the last 2 days. There were about $74 million worth of long positions in the derivatives segment across the two exchanges.
Dogecoin Price: What to Expect After DOGE ETF Approval?
Dogecoin price action was on track to conclude the first week of September with some sideways movement. A clear indication of indecisiveness among investors.
Perhaps the key consideration here is just how much the DOGE ETF approval means for price action. It could pave the way for robust institutional flows.
Moreover, a Dogecoin ETF will further validate the memecoin and potentially make it more attractive. This may allow DOGE price to secure more upside in the remaining leg of the bull market.
Polymarket predicted that there was a 15% chance that Dogecoin price could rally to a new historic high before the end of 2025. If these chances play out, then DOGE might rally by over 247% from its $0.21 press time price tag.
Moreover, robust institutional involvement may aid Dogecoin price action in pushing towards the $1 price target. The meme coin has failed to achieve the same target during the 2021 rally.
However, achieving this milestone would require the crypto to pull off a robust rally, just as it did in the 2021 bull run. Such an outcome would also be more probable if DOGE becomes a U.S national reserve asset, as hinted earlier this year.