Bitcoin, Ethereum, and Dogecoin Are Giving Up Some Gains Today. Here's What to Know.

As far as large-cap cryptocurrencies are concerned, Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Dogecoin (CRYPTO: DOGE) continue to be three of the most closely watched digital assets investors are tracking, especially following the post-election rally these particular tokens have seen. Each of these three major crypto projects have seen significant gains over the past three weeks, though some selling pressure has begun to build for these top-10 projects today. As of 3 p.m. ET, Bitcoin, Ethereum, and Dogecoin have declined 3.1%, 5.1%, and 5.6%, respectively, over the past 24 hours.

Now, it's worth keeping in context Bitcoin's outperformance relative to Ethereum and Dogecoin. This recent surge for Bitcoin has led the world's largest cryptocurrency to fresh all-time highs this past week (nearly breaking through the key $100,000 per token price level, before giving up some of these gains in recent days). Today's decline has the top dog in the crypto world hovering around $93,000 per token at the time of writing, with Ethereum and Dogecoin still 32% and 48% off their all-time highs, respectively.

Let's dive into what's leading to today's selling pressure for these important crypto bellwethers today.

Selling pressure coming from all sides

Bitcoin's decline today appears to have sparked a larger sell-off in many digital assets. Indeed, whichever direction Bitcoin tends to head over the short term, it's usually the case that most other speculative assets in this space tend to follow, and today is no different.

Recent reports that spot Bitcoin ETFs saw their third-largest single-day outflow yesterday suggests that institutional money that may have flowed into this asset earlier this year is looking to take some profit off the table. Retail investors also appear to be following suit, with a number of prominent crypto experts pointing to profit taking-like selling activity being noticeable on a number of top exchanges.

Interestingly, Ethereum has seen net outflows over the past week as well (according to data from CoinGlass), suggesting that a range of investors may be reconsidering position sizing and risk management after what's been an incredible rally in these two top tokens. Additionally, with liquidations data being relatively balanced for Bitcoin but skewed toward leveraged short bets on Ethereum and Dogecoin, there may be some indication that near-term selling pressures could be abating as these positions unwind.

Today's price action for Dogecoin shouldn't be surprising, given the high level of correlation that's typically seen between this speculative meme token and both Bitcoin and Ethereum. While various political catalysts have supported Dogecoin's recent rally (Trump's victory, and by extension the proliferation of Elon Musk within the political sphere, has propelled Dogecoin higher following the election), it's also true that Dogecoin typically trades with much greater volatility than Bitcoin and Ethereum. What that means is that on days like today, investors ought to be prepared for outsized moves to the downside, which is what we're seeing once again.

What to make of today's decline

As mentioned, there are some interesting liquidations data that suggest that (at least for Ethereum and Dogecoin) perhaps today's selling pressure may be coming to an end. As leveraged short bets are increasingly closed out, fresh capital looking to place wagers on the directional moves of these volatile assets can reset, meaning the ultimate direction each of these three tokens is headed in is uncertain right now.

We'll have to see how net inflows/outflows data come in for spot ETFs in the coming days, and I'll be paying close attention to liquidations activity as well as various utilization metrics for these three networks over time. For now, it does appear that the speculative frenzy in crypto assets is fizzling, at least over the short term. But with the strong election-related tailwinds still behind this sector, investors who may be looking for entry points may consider this more recent dip as a buying opportunity, so I wouldn't be surprised to see another rally take place coming out of this consolidation phase.

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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.