After what seemed like the beginning of the end, the cryptocurrency market suddenly found new life in the second half of July. Now enthusiasm appears to be back in swing, with several major cryptos trading above key support thresholds. Is it now time to consider adopting a risk-on attitude with blockchain assets?
Personally, I’m not opposed to rolling some funds in modestly. However, if it’s of any help, I’m not diving into cryptos with any gusto. Primarily, we must appreciate that virtual currencies have already enjoyed a staggering first half of the year. Therefore, a mere two-and-a-half month corrective period seems rather short.
Historically, cryptos tend to rocket higher to ridiculous levels during bull markets, then subsequently enter years-long bear cycles when speculators can no longer support the wild premiums. While the past is not guaranteed to repeat again, I don’t think it’s wise to ignore it altogether.
Moreover, investors have reason to be skeptical about the sustainability of the latest swing up. The most conspicuous eyebrow-raising detail is declining precious metal prices. Over the last several weeks, the metals market has been under pressure as the Federal Reserve flirted with the idea of raising interest rates to combat inflation.
However, this narrative has taken on more weight as the Fed may decide to pare back its massive monetary stimulus program, a consequence of the novel coronavirus pandemic. That caused precious metals to suffer a flash crash recently, which should send a warning to virtual currency investors. Simply, cryptos may not be immune to a more hawkish Fed, which puts these assets on watch.
Since the blockchain market often seems to have a mind of its own, it’s not unreasonable to assume that cryptos can jump in the near term. As well, the sector has attracted new buyers — both of the retail and institutional variety — which also bolsters the case for virtual currencies. Therefore, you may wish to consider some exposure but beware that this market can turn against you in a hurry. Without further ado, let’s check out seven cryptos on fire.
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Cardana (CCC:ADA-USD)
- Dogecoin (CCC:DOGE-USD)
- Polkadot (CCC:DOT-USD)
- Uniswap (CCC:UNI-USD)
- Bitcoin Cash (CCC:BCH-USD)
7 On-Fire Cryptos: Bitcoin (BTC)
The original virtual currency that sparked blockchain fever, Bitcoin looked very worrying in the second half of July. Falling below the $30,000 level wasn’t just a psychological blow, it put the crypto coin below its 50% Fibonacci retracement level off its peak price and threatened to test the 38.2% level. For reference, below are the critical retracements:
- 61.8% retracement: $39,245
- 50% retracement: $31,752
- 38.2% retracement: $24,258
- 23.6% retracement: $14,987
At time of writing, the price is about $44,000. BTC is comfortably above the 61.8% retracement level, which suggests that bullish support has returned in full. Should it maintain this level, it’s quite possible that Bitcoin can start making a rally toward $50,000.
Coincidentally, the “upside” Fibonacci retracement of 78.6% against Bitcoin’s intra-day high of $64,863 would put a bullish target of $50,982 on the map. That’s the goal now, which seems doable. After all, it’s only about 14% higher from the time of writing price.
However, the risk is that if BTC fails at 50K, the bears would love to take down the cryptos again. So buyer beware.
As the backbone of various blockchain projects undergirding several popular alternative cryptos (or altcoins), Ethereum makes a case that it offers fundamental value. While traditional investors buy shares of public companies for growth of an underlying business, blockchain investors buy cryptos and tokens to support initiatives such as decentralized finance (DeFi) and frictionless payment networks.
Still, that didn’t prevent some ugly volatility to smack Ethereum upside the head. Back in the second half of July, ETH dropped below $1,800, which was a devastating figure. Below are the retracement levels for Ethereum:
- 61.8% retracement: $2,576
- 50% retracement: $2,085
- 38.2% retracement: $1,593
- 23.6% retracement: $984
As you can see, ETH was danger close to touching the 38.2% level, which would have tempted me to wish the crypto good night — see you in two or three years time! Fortunately for the bulls, Ethereum engineered a remarkable comeback, with the price sitting at just shy of $3,000 as I write this.
Given that ETH hit an intraday peak of $4,362, its upside target (78.6% retracement level) is $3,429. It’s within only 12.5% of this threshold, making Ethereum a must-watch asset.
7 On-Fire Cryptos: Cardano (ADA)
Among the major alternative cryptos, Cardano is really making a strong impression. At the time of writing, ADA is up over 24% over the past week. That’s a fantastic gain among some of the top cryptos on an upswing.
Can Cardano keep up this brilliant momentum, though? Based on information provided by Stockcharts.com, you can see that ADA has blown well above both its 50- and 200-day moving averages. Contrast that to Bitcoin, where the crypto coin finds itself barely above the 200 DMA. For further reference, below are Cardano’s retracement levels:
- 61.8% retracement: $1.43
- 50% retracement: $1.15
- 38.2% retracement: $0.88
- 23.6% retracement: $0.545
What made ADA so jarring for stakeholders is that it was threatening to drop below $1 during the fallout prior to the present rally. But today, the circumstance has been flipped on its head. Cardano has a time of writing price of $1.70, which is well above the 61.8% retracement.
Based on its intraday high of $2.46, its upside target is $1.93. Since it’s only about 12% away, this seems a do-able target. Thus, you might get some near-term bullishness here.
As my prior writings will reveal, I haven’t been the most supportive of Dogecoin. Indeed, I’ve been on the skeptical side of the spectrum. That might sound strange considering that I own DOGE coins. But as I’ve explained previously, I ended up with my holdings a long time ago. It was a fortuitous circumstance, definitely not something to turn into a viable investment strategy.
Nevertheless, Dogecoin attracts plenty of attention because a) it has a powerful cult following and b) it’s made speculators plenty of money. While I’m no Dogecoin millionaire, I marvel that what amounts to digital nonsense has resulted in a non-zero-value portfolio. Amazing, but let’s get back to reality:
- 61.8% retracement: $0.42
- 50% retracement: $0.34
- 38.2% retracement: $0.26
- 23.6% retracement: $0.16
Despite the incredible percentage gains that Dogecoin has made, we must still keep in mind that risks abound. Primarily, at a time of writing price of 25.7 cents, DOGE is basically riding the 38.2% retracement level, which is not something it should be riding during a bull market.
It’s got a long ways to go to garner confidence. Therefore, the same concept applies: stay away unless you’re a battle-hardened gambler.
7 On-Fire Cryptos: Polkadot (DOT)
One of the recent cryptos that has gained a massive following over a short period of time, Polkadot is, according to Coinmarketcap.com, an “open-source sharding multichain protocol that facilitates the cross-chain transfer of any data or asset types, not just tokens, thereby making a wide range of blockchains interoperable with each other.”
The power behind Polkadot is its ability to make blockchain applications far more efficient than they were previously. Rather than running operations in a single lane sequentially item by item, Polkadot allows its users to run parallel-chain operations, thereby expanding the capabilities and capacities of decentralized platforms.
It’s all great stuff but as you know, these attributes didn’t save it from volatility in the most recent correction:
- 61.8% retracement: $29.63
- 50% retracement: $23.97
- 38.2% retracement: $18.32
- 23.6% retracement: $11.32
Currently, DOT is trading hands at about $20.30, which sandwiches it between the 50% retracement above and the 38.2% level below. Frankly, I’m not ecstatic about Polkadot from a technical perspective as I am with other cryptos who have cleared critical price benchmarks.
If you’re the gambling type, there might be something here. Otherwise, I’d take a pass.
Among critics of virtual currencies, one of the common objections is that cryptos are not tied to anything of fundamental value. I’ve heard some folks call it digital vapor, a substance which gains validity only because someone else thinks so; in other words, it’s the greater fool theory.
Granted, some of the extremely speculative cryptos are plain nutty. But Uniswap is a wonderful example of a blockchain initiative that seeks to democratize financial processes. For instance, with its DeFi technology, Uniswap allows anybody with internet access to provide financial services (such as market making) that are only reserved for the well-heeled.
Several years from now, I can imagine that Uniswap will lead the DeFi revolution. And in the meantime, UNI is one of the top performing cryptos:
- 61.8% retracement: $27.79
- 50% retracement: $22.49
- 38.2% retracement: $17.18
- 23.6% retracement: $10.61
With a time of writing price of $27.30, Uniswap is trading just below its 61.8% retracement level. Given that its intraday peak was $44.97, a 78.6% retracement would give bulls an upside target of $35.35.
UNI has truly turned things around when it was facing devastating lows during the correction. Therefore, I’m cautiously optimistic about this one.
7 On-Fire Cryptos: Bitcoin Cash (BCH)
An example of a hard forked digital asset, Bitcoin Cash came about due to a rising conflict in how to address Bitcoin’s flaws. While the original virtual currency sparked a radical rethink in how we view investments, the underlying architecture left a lot to be desired. Namely, it was cumbersome and inefficient, seemingly as if the original creator(s) failed to appreciate just how popular BTC would become.
After long drawn out negotiations about resolving Bitcoin’s inefficiency issues failed to reach a conclusion, some network contributors decided to form a separate offshoot blockchain; hence, Bitcoin Cash was born, providing the speed and efficiency that the original coin lacked. Though BCH has a few strong proponents, it largely fell in the shadows of other alternative cryptos.
- 61.8% retracement: $953.22
- 50% retracement: $771.22
- 38.2% retracement: $589.21
- 23.6% retracement: $364.01
With a time of writing price of $606, Bitcoin Cash is one of two things; either a contrarian wager or an asset that’s about to suffer more declines. Just barely above the 38.2% retracement, Bitcoin Cash’s lackluster performance reminds us that cryptos are not necessarily a rising tide that lifts all boats.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA, DOGE, UNI, BCH. 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.