Dogecoin Just Added $1 Billion of Market Cap On This Catalyst
Editor’s note: This article has been corrected. Dogecoin is not an Ethereum-based token.
A bifurcation in performance is starting to be seen in the crypto sector. However, unlike the uneven performance we saw for most of this year, in which high-quality tokens outperformed their more speculative counterparts, the more recent rally that’s played out over the past few weeks has seen more speculative meme tokens outperform on a relative basis.
Today, this trend has continued. As of 10:30 a.m. ET, Dogecoin (DOGE -3.46%) had surged 15.1% higher, despite relative weakness in many top-tier tokens. This move represents the addition of more than $1 billion in market capitalization overnight, as this token’s overall valuation has surged to more than $11 billion.
The key catalyst driving Dogecoin’s outperformance appears to be overall bullish sentiment surrounding the upcoming Ethereum merge.
The speculative interest that’s prevailing in the crypto sector isn’t isolated. In fact, in the equity market, there’s been some rather impressive moves among what seemed to be forgotten meme stocks. Short-sellers are once again on their heels, as the retail investor has seemingly stormed back with a vengeance.
For the crypto sector, one that’s inherently more speculative, meme tokens represent some of the highest-risk assets around. Accordingly, during speculative booms, this sector has seen outsized interest. Dogecoin’s returns during previous bull market rallies speak for themselves.
From here, the question many investors have is whether this speculative momentum can be sustained for days, weeks, or months. At some point, rallies fizzle out and are replaced with periods of profit taking, consolidation, or a downturn. This year, we’ve seen what can happen when sentiment around hard-to-value tokens takes a hard 180.
It’s important to remember that many macro headwinds remain on the horizon. And while the market is pricing in a soft landing, with a reversion toward a more accommodative monetary policy from the Fed, the continued tightening of financial conditions through the end of the year could provide significant resistance for retail traders. Thus, those looking to buy Dogecoin in this rally ought to take the necessary precautions, as the recovery could be as precarious as previous ones.