What happened

Among the megacap cryptocurrenciesEthereum (ETH 2.13%) and Bitcoin (BTC 0.98%) are often looked to as bellwethers indicating the market's day-to-day and week-to-week performance. As of 11:45 a.m. ET, these top tokens have appreciated 8.7% and 2.8%, respectively, over the past 24 hours.

Popular meme token Dogecoin (DOGE -3.76%), which is often viewed as a gauge of retail investor sentiment, also saw strong performance today. This dog-inspired token surged 3.9% over the same time. These moves have led investors to question whether the bottom could be in for the crypto sector, or if this is just a bottom in a bear market with more room to run.

The moves these top-tier cryptocurrencies are seeing today appear to be primarily driven by macro forces, once again. Yesterday, Federal Reserve Governor Christopher Waller came out in favor of a 75-basis-point (0.75%) interest rate hike this coming meeting. Many had been calling for a hike of a full percentage point.

Additionally, the ongoing saga that is the announced bankruptcy of crypto lender Celsius this week has created significant volatility in this market. However, investors appear to be taking the view that the potential contagion from such failures could be contained, boosting valuations across the sector.

So what

The prevalent thesis many crypto investors held not too long ago was that cryptocurrencies such as Bitcoin, Ethereum, and even Dogecoin are low-correlation assets to equities. Cathie Wood has famously (or infamously) taken this position in the past, signaling that these assets are divorced from the macro drivers of stocks, making them inherently better investments for growth investors looking for risk-adjusted returns over the long term.

That thesis sounded great, but the decade-long bull market we all enjoyed is over. Now investors are grappling with the reality that macro forces that bolstered stocks and cryptos alike (accommodative monetary policy) is now seeing a stark shift to a very hawkish policy. Less easy money flowing into high-risk assets means lower valuations, whether investors like it or not.

Compounding concerns for crypto investors are concerns around high-profile failures in the crypto space of late. Whether we're talking about Terra, hedge fund Three Arrows Capital, or Celsius, there's now contagion risk specific to the crypto sector. While concerns may be abating somewhat today, this is something investors will need to watch.

Now what

These daily moves we've seen over the past week in the crypto space aren't out of the ordinary. This is a volatile asset class and will very likely remain so. Indeed, valuing digital currencies with no inherent cash flows and few fundamental metrics to do so is very difficult. When we bring fast-changing macro factors and contagion risk into the equation, the valuation process becomes even more difficult.

Thus the question of whether we've hit the bottom or a bottom will likely only be determined in hindsight. Today, crypto investors have some semblance of bullish sentiment to hold on to. Let's just see if this lasts.