Ever since the development of the first cryptocurrency, advocates of the burgeoning blockchain industry have long sought mainstream credibility. Finally, after a tumultuous period involving the novel coronavirus pandemic followed by unexpectedly rampant speculation, it appears that cryptos are having their day in the sun. However, nothing is ever simple in this market.
True, various cryptos have garnered tremendous attention from new investors, particularly among the younger generations. Leveraging decentralized protocols and frictionless transactional architectures, along with 24/7/365 availability for trading, virtual currencies fit nicely with youth culture. But as eyeballs focus in on cryptos, another less desirable concept has taken hold: calls for regulation.
Perhaps this is the greatest irony of the blockchain’s trajectory. Initially designed to replace human intermediaries which facilitate transactions and broker contracts, the blockchain could spark an entirely decentralized economy. Of course, this clashes with government authority and the hegemonic influence of global central bankers. Invariably, then, regulation was coming whether blockchain supporters liked it or not.
While I might draw rancor and pitchforks with this next statement, in all fairness, I can understand the argument for some regulation for cryptos. On paper, a purely decentralized system sounds ideal. But at the end of the day, technology always fouls up. In that situation, you want answers. Just look at all the complaints that Coinbase (NASDAQ:COIN) fielded, which drew skepticism regarding its initial public offering.
In other words, a centralized platform provides the comfort of having someone on the other end when you dial customer service. Still, I also appreciate why regulation sends a chill down the blockchain industry’s spine. There’s also no telling how the federal government will go about regulating, which adds to the uncertainty. It’s then no surprise that cryptos have traded ambiguously this week.
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Cardano (CCC:ADA-USD)
- Ripple (CCC:XRP-USD)
- Bitcoin Cash (CCC:BCH-USD)
- Polygon (CCC:MATIC-USD)
- Dogecoin (CCC:DOGE-USD)
If there’s a theme for this week’s update on major cryptos, it’s that you should exercise skepticism. Before piling into the present discount relative to the sector’s May 2021 highs, you should wait until these digital assets prove they have what it takes to move higher.
Cryptos to Watch: Bitcoin (BTC)
As the undisputed king of cryptos, the blockchain investment sector revolves around Bitcoin. I’m certain that millions of virtual currency advocates were hoping that alternative cryptocurrencies or altcoins would split off from its correlation to BTC and trade on their own fundamentals. So far, that hasn’t happened on a wide scale, meaning that all eyes are still on Bitcoin.
Over the last several days, BTC has traded higher from its lows in June, which is encouraging. As you know, cryptos can move on a dime. With enough positive sentiment, it’s very possible that Bitcoin can quickly reverse its losses from the May collapse. But is this circumstance likely?
Currently, the situation for BTC is ambiguous. It’s trading in the middle of a broadening wedge pattern. Although rangebound trading at around $34,000 is better than dipping into high $20,000 territory, Bitcoin really needs to get going to gain technical credibility. Unless it breaches the $42,000 level, it’s tough to have near-term confidence.
While Bitcoin’s creator or creators developed the first blockchain platform to spark frictionless cross-border payments cheaply and efficiently, the underlying technology had much more to offer. That’s where Ethereum came into the picture, introducing the concept of smart contracts. Rather than merely disrupting payment processing systems, Ethereum’s developers had grander goals of eliminating extremely costly intermediaries, such as attorneys and brokers in business dealings.
To be fair, Ethereum’s incredible utility — something that even the Bitcoin architecture can’t match — sparked some variance between ETH and BTC. However, the overriding theme remains the same. If Bitcoin encounters weakness, it’s only a matter of time before other cryptos, including ETH coins, suffer the same fate.
Having said that, Ethereum has been on the move recently, which is encouraging for its proponents. At time of writing, ETH is trading hands above $2,300. That’s a very good start but this level is below the altcoin’s long-term rising support line. At minimum, I need to see Ethereum rise above $2,600 before I get too excited.
Cryptos to Watch: Cardano (ADA)
I’ve got to admit that among the major cryptos, I’m most surprised with the resilience of Cardano. If you take away ADA’s brief run above $2.20 threshold, Cardano has generally held up well. In context, this altcoin seems like a solid discounted opportunity.
Further, it has much fundamental cred to support investor bullishness. Based on its website, Cardano is the first proof-of-stake protocol “founded on peer-reviewed research and developed through evidence-based methods.” I’ll admit that I’m not 100% sure why this qualification is necessary and why its programmers don’t claim the first staking protocol period, but I won’t put words in their mouths.
As exciting as ADA is relative to the decidedly negative cryptos, investors still need to be on their toes with Cardano. Specifically, the altcoin is trading below what I would term the demarcation line separating support above the line and resistance below it.
At time of writing, ADA is trading at $1.42. I’d need to see this between $1.46 to $1.50 before I put too much capital at risk.
Speaking of regulation concerns from earlier in this discussion, Ripple found itself possibly violating securities regulations, at least according to the Securities and Exchange Commission. The regulatory agency put Ripple Labs — the developers behind the XRP cryptocurrency and blockchain architecture — on blast, claiming basically that if it walks like a duck and quacks like a duck, it must be a duck.
My InvestorPlace colleagues have done a great job of dissecting the Ripple lawsuit every which way to Sunday so I’m not going to repeat everything they’ve written about. For our purposes right now, though, you can say that the legal attack put a chill on other cryptos. If this is the kind of regulation that the blockchain industry can look forward to, it’s not a pleasant situation.
As for the upside potential of Ripple, it appears that XRP keeps falling from technical threshold after technical threshold. To have confidence, I’d like to see XRP move to at least the 78-cent level before risking any money here.
Cryptos to Watch: Bitcoin Cash (BCH)
Every now and then, I like to peruse social media and see what various communities have to say about cryptos. For Bitcoin Cash, there is a small but vocal group that believes BCH is criminally undervalued. Before you thrash the statement — let’s face it, BCH has some controversy to its name — Bitcoin Cash might have deserved better than it got.
At its absolute peak, BCH was soaring toward the $4,000 level. This time around, the altcoin fell a bit short of $1,600 based on average pricing data from Coinmarketcap.com. That’s unfortunate considering that so many other cryptos rang up to all-time highs — and by a country mile. So yes, in that respect, Bitcoin Cash is undervalued.
Still, whether it’s undervalued or not, you shouldn’t jump on BCH without serious consideration to its risk factors. As of this writing, Bitcoin Cash is trading below a rising support line. Until it can get to the $750 price point, I wouldn’t get too excited.
One of the newer cryptos that have made plenty of noise this year, Polygon’s architecture represents an evolution in the blockchain space. First, you had Bitcoin that proved the viability of a decentralized peer-to-peer network. Next, Ethereum took the stage, introducing the concept of smart contracts. Now we have Polygon.
Through its unique architecture, Polygon facilitates a modular, flexible framework, supporting the development of multiple types of applications. To put it another way, Polygon is a multi-chain system or the internet of blockchains, to use crypto parlance.
Fundamentally, there are very few if any blockchain networks as exciting and potentially groundbreaking as Polygon. However, that doesn’t always translate to a higher valuation for the underlying digital asset. Unfortunately, that happens to be the case with MATIC.
Up until a few weeks ago, MATIC was trending along a rising support line. Today, the altcoin finds itself below said line. Preferably, MATIC needs to rise above $1.35 to warrant a shot.
Cryptos to Watch: Dogecoin (DOGE)
As everyone has mentioned for the umpteenth time, Dogecoin is a joke coin, created as a parody of the wild speculation toward cryptos. However, people relished the asset immediately upon its release. And recently, DOGE became serious business. While the nominal price isn’t impressive, the percentage gains it made was absolutely bonkers.
Further, the prominent stories of Dogecoin millionaires almost surely contributed to strong sentiment, even now as the coin fell from its meteoric heights. However, it’s worth reminding investors that have the speculation bug that gambling on this altcoin is too much of a high-risk endeavor.
Finally, just from a technical analysis perspective, I don’t expect Dogecoin to recover for some time to come. As I’ve been consistently warning about, DOGE charted a bearish head-and-shoulders pattern in the second quarter of this year. So far, nothing has happened that would suggest DOGE will break above the implications of this pattern.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA, XRP, BCH and DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.