What happened
Interestingly, but perhaps not surprisingly, altcoins are the leading decliners in today's crypto market, which has dropped 1.7% over the past 24 hours, as of 9:30 a.m. ET on Monday. Among the top altcoins investors are watching, meme token Dogecoin (DOGE -1.04%) has dropped 2% over the past 24 hours, slightly outpacing the market.
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Among the more interesting arguments many are making for the recent decline in Dogecoin, and other higher-risk cryptocurrencies, is the idea that crypto markets are becoming more efficient. Various investors, traders, and speculators have poured into bearish bets on more-speculative tokens lately, taking the under on a trade that's been highly volatile (and very profitable for bulls) in recent years. This downward pressure from short-sellers and options traders betting Dogecoin will drop appears to be suppressing moves to the upside on what would have previously caused sharp moves higher, while fueling outsize moves to the downside in recent months.
So what
Market efficiency is what many investors in the stock or bond markets take for granted. In the crypto world, a relative lack of products allowing investors to take the short end of a trade -- as well as a limited impetus to do so given how violently these tokens have moved higher in short periods of time -- has understandably created a disproportionately bullish tilt favoring speculators.
However, the increase in short interest seen among many top tokens recently highlights a significant shift in sentiment in the crypto markets. For example, the put-call premium seen on Bitcoin recently hit a six-month high, suggesting investors are pricing in a higher probability of top tokens declining from here on out.
Now what
As the crypto market becomes more efficient, and investors look for profitable ways to trade top tokens, Dogecoin could be a token that speculators continue to focus on as a way to play the downside in the digital currency space. As a highly speculative meme token that's still held on to a vast amount of its gains from last year (despite being down more than 80% from its peak), there's reason to believe that more downside could be on the horizon. Given the firm downtrend that doge and its meme token counterparts have exemplified of late, the more profitable bet for Dogecoin could indeed be shorting any near-term spike relating to Elon Musk's tweets, for example.
Ultimately, time will tell whether bullish sentiment will once again take over in the meme coin space. For now, Dogecoin remains a top token I'm watching among dog-inspired cryptocurrencies, as a gauge of the overall risk tolerance of crypto investors right now.
