These 3 Cryptos Are Feeling the Elon Musk Effect Today

What happened

Today has been a broadly positive day for investors, with a number of top cryptocurrencies catching a bid after a tough long weekend. Today, Dogecoin (DOGE 0.30%) is among the tokens investors are watching most closely, following some bullish comments from Tesla CEO Elon Musk around the dog-inspired meme token. As of 3:30 p.m. ET, Dogecoin has shot 15.3% higher, as Musk reiterated support for Dogecoin and its "hodlers."

As far as mega-cap tokens go, Bitcoin (BTC 1.26%) and Ethereum (ETH 0.89%) have posted solid performances today (up 5.6% and 4.4% over the past 24 hours, respectively), buoyed by a marketwide sentiment shift. Certainly, some of this bullish sentiment can be tied to Elon Musk's comments. However, more broadly, investors in higher-risk parts of the market are seeing fit to hit the bid today. Tech stocks and other "growthier" areas of the market are up dramatically today, alongside the crypto sector.

Dogecoin's fundamental underlying value is very difficult to put a price on. Accordingly, the volatility this token has seen over the past two years has been remarkable. Emboldened by Musk, the self-proclaimed "Dogefather," investors have piled into this meme token with fervor, taking the token on a wild ride to an all-time high of more than $0.73 a little more than a year ago. Trading at around $0.06 per token after this recent rally, perhaps there's a speculative argument that can be made with this token.

Investors in Dogecoin tend to read the tea leaves more than investors in other projects do. The speculative nature of this meme token can't be ignored. Thus, when Musk speaks, investors pay attention.

On the other hand, Bitcoin and Ethereum are often viewed as proxies for investor sentiment across the entire crypto sector. During bull market rallies, these tokens have generally led the way, with investors gauging how the market is doing largely by assessing these two tokens' performance. Thus, today's rally in line with the broader crypto market makes sense.

However, a high correlation to riskier equities is also a phenomenon that's catching the attention of investors. While Bitcoin (and Ethereum to some extent) were previously viewed as stores of value, more investors are now taking the view that these tokens are much more sensitive to macro forces, such as monetary policy, than previously thought.

Now what

Today's face-ripping rally across the equity and crypto markets is a welcome reprieve for many growth investors. This year has not been kind to the aggressive investor, to say the least. However, there have been a few bear market bounces that have surprised investors thus far. The question is whether this recent bounce can be sustained, or if further downside is on the horizon.

For today, at least, investors have found some positive momentum to jump on. Given the nature of the crypto market, perhaps this momentum can turn into meaningful near-term rewards for investors. That said, as always, the risk profile with this asset class is higher than others. Accordingly, it's important for investors to practice prudent risk management with any such positions, especially in this market.