If a few small meme tokens see some serious selling pressure, few investors will bat an eye. However, when major cryptocurrencies such as Bitcoin (CRYPTO:BTC), Ethereum (CRYPTO:ETH), and Dogecoin (CRYPTO:DOGE) all drop by double-digit percentages, the market takes notice.
As of late Thursday evening, Bitcoin, Ethereum, and Dogecoin had fallen by between 13% and 17% relative to where they were at the close of trading on Wall Street last Friday. However, as of noon ET Friday, a rally had brought those cryptocurrencies' weekly declines into the 9% range.
These three tokens don't just follow the broader crypto market -- sometimes, they can move it themselves. A catalyst for any of them is likely to cause ripple effects across the sector.
For Bitcoin specifically, this week started off rather poorly. On Tuesday, China's National Development and Reform Commission announced the latest in a string of efforts to restrict and block Bitcoin mining. Specifically, the commission reported that it was looking at various ways of increasing its "full-scale" crackdown on mining, such as increasing electricity prices for any large institution found to be abusing the country's low-cost energy to engage in Bitcoin mining.
Ethereum's recent token price decline has been broadly ascribed to higher "gas fees" -- the fees users pay to have their transactions processed and validated on its blockchain. Those have surged to more than double the levels seen in late October.
For meme tokens such as Dogecoin, the issue may simply be that there's a sentiment shift underway regarding these types of cryptocurrencies, whose value is driven more by hype than by any fundamentals.
However, all three appear to be seeing pressure due to concerns over provisions in President Biden's recently enacted infrastructure bill that changed how cryptocurrencies are taxed and regulated. Additionally, a stronger U.S. dollar this week has been a headwind for the crypto sector.
A host of macro and token-specific factors appear to be driving the recent declines in these large-cap crypto tokens. Bullish sentiment appears to have reemerged on Friday, but overall, it has been a volatile week.
Right now, it appears investors are still digesting the latest news from the crypto world. Whether a "buy the dip" approach makes sense now is still unclear.
For investors in Bitcoin and Ethereum, which are more commonly viewed as longer-term investments, this may be a great time to buy. After all, buying low and selling high is the name of the game. And both tokens remain generally on strong upward trajectories, having recently hit new all-time highs last month.
For Dogecoin, the near- to medium-term outlook is more difficult to project. After all, the meme token has been inherently more volatile than the two leading cryptocurrencies. Accordingly, Dogecoin appears to be a play on where traders see sentiment headed over time.