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It's been a wild and wacky few days in the cryptocurrency world. Megacap tokens are seeing continued volatility, with Bitcoin (BTC 8.12%), Ethereum (ETH 12.64%) and Dogecoin (DOGE 13.83%) still up materially from yesterday's close (4 p.m. ET). These three tokens rose 2.8%, 3.8%, and 12.9%, respectively, over this time frame, as of 1:45 p.m. ET.

Now, these increases are markedly lower than the previous increases these tokens saw during yesterday's session. Bitcoin, largely viewed as the benchmark for the entire sector, surged to a multiyear high of more than $63,000 per token yesterday, before giving up a good chunk of these gains. Currently, Bitcoin continues to hover around the $60,500 level, still substantially higher than the $45,000 level the token started the year at and the sub-$20,000 level investors saw late last year.

Let's dive into what's driving this positive price momentum among these three megacap tokens today.

Bitcoin's run toward its record price (nearly $69,000 per token in late 2021) has been remarkable. Initial interest around the world's largest cryptocurrency following the approval of spot Bitcoin ETFs by the Securities and Exchange Commission gave way to selling pressure, due to a range of factors, including FTX's liquidation of assets in a bid to make investors whole. However, a turn of events has materialized, with capital flows into spot Bitcoin ETFs surging more than $7 billion over the past two months, as institutional investors jump on digital assets in a manner reminiscent of the previous bull market rally.

Investors banking on a supply/demand dislocation in terms of Bitcoin have been proven right, with momentum driving additional interest in leveraged products such as perpetual contracts, which traders and speculators can use to bet on short-term spikes in a token's price. Notably, the funding rate for Bitcoin perpetual futures hit the highest level since the last bull market peak in 2021. This signals there's plenty of speculative capital being put to work, in addition to the billions of dollars of institutional capital flowing into Bitcoin alone.

For even more speculative assets such as Dogecoin, these sorts of trends are very bullish, and are a key reason why we're seeing even greater moves in meme tokens. Dogecoin's price action has largely depended on broader sentiment in this sector. And with Bitcoin remaining the benchmark asset others are valued against, a rising tide appears to be lifting all boats.

Additionally, speculation around when spot Ethereum ETFs could be introduced is building. If the wave of capital hitting Bitcoin flows into Ethereum as well, investors could be due for big upside. Accordingly, the market is doing what it does best, and discounting these potential catalysts ahead of time, with Ethereum getting to multiyear highs on this sector-wide momentum as well.

If many investors were asked yesterday if Bitcoin were to hit an all-time high this year, the answer would likely have been a resounding yes. And given the fact that the world's largest crypto is now within 15% of its all-time high, there's certainly something to this thesis. I wouldn't be surprised if this period of consolidation we're seeing today gives way to another rally in the coming days or weeks that takes Bitcoin and its megacap counterparts near, or above, all-time highs.

Long-term investors who have stuck with megacap tokens through the 2022 and 2023 bear market period have been rewarded. Now, the question is how much profit-taking will take place at current levels, and whether institutional capital flows and speculative activity can be enough to push these tokens over the top. Certainly, these are three tokens every investor needs to watch closely right now.

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Why Bitcoin, Ethereum and Dogecoin Are Trending Higher Today - The Motley Fool