Why Dogecoin Flopped This Week

The world's largest meme cryptocurrency, Dogecoin (CRYPTO: DOGE), has seen more volatility than perhaps is typical for the Shiba-Inu-inspired token. Over the past week, Dogecoin has declined 11.1% as of 9:30 a.m. ET Sunday.

Dogecoin has one of the most robust platforms and followings among all meme coins, and it was explicitly created to build community. In doing so, this token's overall performance has been driven, at times, more by celebrity posts and those from notable CEOs than by anything truly resembling fundamentals.

With that in mind, volatility has become part and parcel of what Dogecoin is all about. Seeing prior rallies in the pandemic era which drove Dogecoin's valuation to astronomical highs (still at around $21 billion at the time of writing), this is a token that's often viewed as one of the most important sentiment gauges in this sector, at least as representative of the most speculative areas of what many would consider to be an already-speculative crypto sector.

Let's dive into what drove Dogecoin's significant decline over the past week.

The good and bad behind Dogecoin's weekly move

Source: Getty Images.

What's interesting about Dogecoin's direction of travel this week is that there are both headwinds and tailwinds to note.

On the bullish side of the ledger, a U.S. Senate bill aimed at reshaping which tokens are considered investment-worthy under regulatory standards has been introduced. This bill could, in theory, put Dogecoin on a similar footing to other mega-cap tokens such as Bitcoin and Ethereum, with XRP and Solana also included in this mix. Additionally, a new spot Dogecoin ETF, which came to market on Friday under the ticker TDOG, has some investors perking up. The confluence of these two catalysts could drive significant token demand over the near and medium terms.

That said, the macro environment overshadowed any positive developments for Dogecoin this past week. Concerns about potential European tariffs (which President Trump has seemingly backed off on) and heightened geopolitical rhetoric (surrounding Greenland a week ago) drove valuations in some of the higher-risk or more speculative areas of the market sharply lower.

So, as a barometer of risk (or more aptly, investor demand for risk), Dogecoin's weekly move is well-choreographed. Coupled with the fact that we saw the largest spot ETF outflows for funds tracking Dogecoin this past week in a long time, that's a recipe for continued downside momentum.

I think the key factor investors will continue to watch moving forward is how much investor capital flows into or out of these ETFs. Given their real-time, publicly traded nature, these spot ETFs appear to be what investors are keying in on. Right now, momentum is not trending to the upside.

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.