What happened
What looked to be a broad-based recovery among top cryptocurrencies last week has once again turned around this week. Top tokens Bitcoin (BTC 0.33%), Ethereum (ETH 0.55%), and Dogecoin (DOGE 0.23%) all declined considerably this morning.
For Bitcoin and Ethereum, today's moves lower have essentially erased all the positive momentum those tokens saw last week. Over the past 24 hours, Bitcoin and Ethereum are down 2.4% and 3.9% as of 9 a.m. ET. Reports that 30% of Bitcoin holders are now in the red have some recent investors spooked. Additionally, El Salvador's credit rating has come under pressure by ratings agencies over recent Bitcoin buying, with the country's risk of default seen as elevated following recent Bitcoin purchases. For Ethereum, much of this token's recent decline appears to be related to investors continuing to look at investing in smaller competing blockchain ecosystems over the world's top smart-contract-enabled blockchain network.
Image source: Getty Images.
Meme token Dogecoin has seen slightly larger declines, down 4% over the past 24 hours as of 9 a.m. ET. That said, this token's impressive increase last week has left a little seven-day green on the table, with this token still 7.3% higher over the past seven days. Investors appear to be taking a risk-off view of all markets today, with tokens perceived as more volatile seeing steeper sell-offs.
So what
For Bitcoin and Ethereum, there's been quite a bit of news flow over the weekend that crypto investors appear to still be digesting today. These top tokens generally drive market sentiment for other tokens, and their marked declines this morning suggests investors don't like what they see.
As with most momentum-driven rallies, those early birds did catch the worm. Those later to the game, who invested in late 2021 for example, may be down on their crypto investments, even in top tokens like Bitcoin and Ethereum. The market is taking a breather right now, something long-term investors in these two tokens may be very familiar with. For those who put fresh capital to work in these two blockchain networks, the question is how willing new investors will be to hold on for dear life.
For meme tokens like Dogecoin, this question is amplified. Dogecoin's risk profile is one that is certainly best suited for more aggressive investors. Right now, it does not appear any sort of meaningful multiday momentum-driven rally is likely to materialize, though the banter around Dogecoin from Elon Musk and others remains hot right now.
Now what
Looking at these three top tokens, you can have one of two takes. On the one hand, bulls will suggest this recent selling pressure represents nothing more than a consolidation period, one unlike the various bear markets Bitcoin and Ethereum have seen in the past.
But bears on any of these tokens may note that previous declines among even the highest-quality cryptocurrencies have historically been vicious. Predicting exactly what the bottom could potentially be for these tokens is a dangerous task. Accordingly, many simply choose to sit out the crypto game, arguing that the risk-adjusted returns of this sector just aren't there.
For Dogecoin in particular, these concerns are perhaps amplified. After all, Dogecoin is a much more recent token that experienced similar surges and plunges over the past year. However, these moves have been much more violent, and ultimately the resiliency of this token is less proven.
Can these top tokens regain momentum through the end of January? Or will the bears be proven right? Time will tell. However, this month has certainly shaped up to be an interesting one for crypto investors on both sides.
