Here's Why Dogecoin Ripped 4% Higher Today

On an intraday basis from yesterday's equity market close to Tuesday at 5:30 p.m., the so-called "Godfather" of meme coins, Dogecoin (CRYPTO: DOGE), surged 4.1%. As I mentioned in another recent piece on the rival meme token Shiba Inu, these moves in what I would classify as somewhat similar assets at the more speculative end of the cryptocurrency sector are interesting, as they come ahead of a pivotal interest rate meeting by the Federal Reserve Open Market Committee tomorrow.

With so much uncertainty ahead in the near term, the willingness of investors to hit the bid is certainly telling. I'm of the view that these sorts of intraday moves ahead of a pivotal catalyst are perhaps more telling than the eventual volatility that may lie ahead, as they suggest investors are taking a more bullish outlook on speculative assets more broadly.

With that in mind, let's dive into some token-specific catalysts that could drive Dogecoin even higher over the course of the latter half of this week.

Will this momentum in Dogecoin continue?

Source: Getty Images.

In a sense, I think that meme tokens are among the most valid and usable sentiment gauges in the market, and many experts appear to agree. Forget about surveys or polls; seeing what investors are doing with the most speculative parts of their portfolios can be very telling. As they say, money talks.

What's interesting is that Dogecoin's near-term trend has been relatively consistent, with some of my commentary from yesterday suggesting that some of this move is tied to the macro environment and positioning ahead of tomorrow's meeting. I still think that's the case.

However, upon examining the underlying data, it appears that most of this move today is speculative in nature. Capital flows aren't the main cause of today's spike, with recent data showing spot ETFs tracking the price of Dogecoin saw just $142,000 in total value change hands over the past 24 hours (as of this morning). And Dogecoin's total value locked, a measure of how much value is locked within its network via decentralized exchanges and other applications, sunk from September levels of around $25 million to around $15 million in recent days.

That said, turning our attention to liquidation data, which measures the percentage of bullish or bearish leveraged derivatives bets that are unwound over 24 hours, it's clear that bearish investors are being unwound at an increasingly rapid rate. Over the past day, roughly $3 million of the $4.5 million in liquidations were among short positions, with 1-hour and 4-hour metrics skewing even more toward bearish bets getting unwound.

If this momentum continues in the derivatives market, it could be the case that Dogecoin's underlying fundamentals simply don't matter as much as investor sentiment. Over the past few days, sentiment has shifted sharply, and that's the story with Dogecoin once again.

Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.