Dogecoin just added $1 billion of market cap on this catalyst

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

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 (CRYPTO: DOGE) surged 15.1% higher, despite relative weakness in many top-tier tokens. This move represents the addition of more than $1 billion in market capitalisation overnight, as this token’s overall valuation has surged to more than $11 billion.

The key catalyst driving Dogecoin’s outperformance appears to be bullish sentiment surrounding the upcoming Ethereum merge. Various Ethereum-based tokens, such as Dogecoin, have outperformed in this merge-based rally, in many cases to a greater degree than Ethereum itself. 

So what

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.

Now what

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.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Dogecoin just added $1 billion of market cap on this catalyst appeared first on The Motley Fool Australia.

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More reading

• Here’s why the Dogecoin price has had such a great week
• Why Ethereum, Bitcoin, and Dogecoin jumped this morning
• Why Bitcoin, Ethereum, and Dogecoin are shooting higher today
• Expert panel slashes 2022 outlook for Dogecoin price. Here’s why
• Dogecoin price could more than double by the end of 2022: expert panel

Chris MacDonald has positions in Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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