After a blistering rally over roughly the past month-and-a-half period, Bitcoin (CCC:BTC-USD) crossed over the all-important $50,000 level. Both a technical line of support and a key psychological threshold — we humans like round numbers — breaking past 50K set up a clear target to $60,000. From there, who knows what could happen to BTC and other cryptocurrencies? With the institutional players moving in, cryptos appeared to have a very bright future.
That is, until they didn’t. In one fell swoop, the Bitcoin price slipped from its intraday high of nearly $53,000 to an intraday low of just under $44,000. In a panic — or was it a dead-cat bounce? — the bulls managed to bring the price back up to around the 46K level, where the token stands at time of writing. But given the steep technical damage, it’s unclear whether this level will hold.
What exactly happened? Well, the small Central American nation of El Salvador made a historic move by recognizing Bitcoin as legal tender. However technical glitz along with an angry populace protesting the official integration of cryptos made for an overly eventful day. Analysts speculate that whales — those individuals that hold significant amounts of a given crypto — dumped Bitcoin in accordance with the “buy the rumor, sell the news” principle.
Personally, I think this is an important lesson for anyone thinking about speculating in the sector. Yes, it’s wonderful that institutional players and other affluent powerbrokers have been piling into cryptos. But you can’t have your cake and eat it too. When these major influencers decide to reallocate their holdings, that can create a seismic impact on cryptos — just like you’re seeing right now.
Therefore, it may be time to shift the narrative. It isn’t necessarily bears the “evil” shorts that are taking down Bitcoin. Instead, the call is coming from inside the house. The very people and entities that blockchain proponents welcomed with open arms are likely the same ones abandoning ship. That makes the following alternative cryptos extremely treacherous.
Here are 7 cryptos currently under threat of betrayal by whales:
- Ethereum (CCC:ETH-USD)
- Cardano (CCC:ADA-USD)
- XRP (CCC:XRP-USD)
- Dogecoin (CCC:DOGE-USD)
- Polkadot (CCC:DOT-USD)
- Chainlink (CCC:LINK-USD)
- Litecoin (CCC:LTC-USD)
Part of the reason why I haven’t been wild about the rally in cryptos in prior updates is due to the lack of volume confirmation. As I noted last week, volume levels should confirm bullish price action. That it didn’t means that for anyone paying attention to technical analysis talking points, the fallout wasn’t completely a surprise. Moving forward, always take a look at volume before making big trades.
I can’t lie: before the present collapse in cryptos, Ethereum was among the most promising digital assets. After going rangebound around the $3,100 level from August 7 to August 30, 2021, the valuation of ETH-USD soared on the final day of the month. The start of September added even more bullishness, seeing Ethereum breach the $3,800 level.
From there, the second-most valuable virtual currency got within kissing distance of $4,000. For many observers, 4K seemed like an afterthought: “Surely, with this much momentum, Ethereum will make a run for 5K and perhaps cement a baseline for an eventual run at five-digit prices…”
Never say never but from this vantage point, ETH-USD bulls will have to dream a while longer.
As I mentioned earlier, the main sticking point here is volume. Since July 26, accumulation (bullish) volume remained flat to declining, even while the price of Ethereum skyrocketed. That’s not an encouraging setup, which may have stemmed from the masses not following the institutional players upward. Recognizing this, it’s possible that the whales dumped and made their profits.
The positive news is that Ethereum is trading above its 50-day moving average, which stands at $3,018. Drop below that, though, and things could get ugly for ETH-USD and other cryptos.
For anyone remotely interested in cryptos, Cardano’s current circumstance is a massive gut check. And for full disclosure, I recently sold a significant amount of ADA-USD as I fear prices may be headed lower.
For years, one of the criticisms of the virtual currency sector is that basically all digital assets correlate with the Bitcoin price. Even if they disassociate temporarily, we’ve never seen a circumstance where a major crypto coin or token enjoyed a bull market while BTC-USD languished in a bear market.
Recently — before the present crisis — Cardano appeared to be trading under its own fundamentals. That made sense because ADA-USD utilizes a proof-of-stake protocol, a suddenly hot topic because of the environmental impact of the proof-of-work counterpart. So it didn’t raise many eyebrows when Cardano hit all-time highs while other cryptos were a bit off their peak valuations.
Alas, this week’s fallout has devastated pretty much everything crypto, including Cardano. From around $2.80 to $2.36 in less than a 48-hour cycle, ADA-USD needs to pick up the pace; otherwise, the technical posture looks very ugly.
Also disappointing is the fact ADA-USD previously represented a case where rising volume did confirm rising prices, proving that even the right signals can lead to the wrong outcome.
For many advocates of cryptos and decentralization-based protocols, the Securities and Exchange Commission is a bad umpire ruining a good baseball game. The SEC’s lawsuit against Ripple Labs — the originator of the XRP coin — seems particularly motivated by bad blood.
I don’t want to get into the granularity of the legal argument but in a nutshell, the SEC views Ripple Labs as sidestepping laws governing initial public offerings, accusing the company of creating a defacto security in XRP coins. On the other hand, Ripple has defended itself on the argument that XRP-USD is no different than Bitcoin and Ethereum, neither of which are apparently on the SEC’s hit list.
However, that safety zone has become murky again, with the regulatory agency again kicking up a storm. Recently, Reuters reported that the SEC threatened to sue popular wallet and exchange service Coinbase (NASDAQ:COIN) if it moves ahead with a crypto lending and interest-earning initiative.
I don’t foresee a showdown between the SEC and Coinbase in the immediate future, which will cause unnecessary headaches. But just the fact that the regulatory body is so aggressive about cryptos puts a dark cloud not only on XRP-USD but on the rest of the complex.
Generally speaking, it isn’t my top preference to discuss meme stocks or meme cryptos, primarily because they’re wildly unpredictable.
The whole arena reeks of Murphy’s Law. When you think it’s time to sell, the price of the target asset rises. When you feel it’s time to get in on the ride, it plummets. But for Dogecoin, I think it’s time to start being reasonable with your position.
According to Coinmarketcap, DOGE-USD has lost 13% of its market value over the past 24 hours at time of writing. Compared to the other major cryptos in the top ten rankings by market capitalization, Dogecoin is performing conspicuously worse than most of the competition.
Moreover, the latest bout of volatility has the crypto coin sandwiched between its 50 DMA at the top and its 200 DMA at the bottom. Given the heavy selling pressure, it’s probably best to trim some exposure, especially if you’re already profitable.
Granted, there’s always the possibility that the bulls wake up and resume pushing Dogecoin higher. I can’t tell you what to do, but as for me, I’ve taken my own advice and reduced some exposure.
There are 2 kinds of cryptocurrencies in this world. Those that focuses on the utility and associated innovations of blockchain technology and those built on pure speculation. At first glance, the two appear to support each other’s bullish narrative. In reality, it’s better to divide and conquer digital assets by separating the two.
Case in point is Polkadot. One of the most innovative blockchain-based initiatives, Coinmarketcap describes Polkadot as a “sharded multichain network, meaning it can process many transactions on several chains in parallel (‘parachains’). This parallel processing power improves scalability.” As I and many other analysts have explained, Polkadot is like a network of several multilane highways, while Bitcoin might be considered a single-lane roadway.
On paper, the potential utility of Polkadot’s platform sounds exceptionally compelling. And it is — except that apparently, the whales don’t care. Compared to many other major cryptos, DOT-USD is suffering horribly, down 17% over the past 24-hour period at time of writing.
Presently, the crypto coin is trading just underneath its longer-term 200 DMA, which is bearish. Also, the selling volume is exponentially higher than anything we’ve ever seen from Polkadot. Be extremely careful here — heck, you might even want to consider cutting your losses with this one.
One of the most intriguing cryptos from a utility standpoint, Chainlink has quietly generated bullish momentum in recent years. In the early spring of 2019, you could have picked up LINK-USD for less than 50 cents. But it soon experienced a major lift, drawing prices firmly into single-digit territory. From there, it’s been a steady upward ride, peaking at above $50 before spring 2021’s Great Crypto Correction.
But now that the secret’s out, can Chainlink survive the current onslaught?
On one hand, technologists will appreciate the broader applications that are now possible through Chainlink’s architecture. As Coinmarketcap explains, “Chainlink is one of the first networks to allow the integration of off-chain data into smart contracts. With many trusted partners, Chainlink is one of the major players in the data processing field.”
In other words, LINK-USD allows the blockchain to move beyond the decentralized ecosystem, incorporating data points from non-blockchain-related events to verify and facilitate the execution of smart contracts. Then again, as I mentioned earlier, the whales don’t seem to care so much about the fundamentals.
Currently, LINK-USD trades between its 200 DMA (top) and 50 DMA (bottom). I’m not exactly panicking as its technical posture seems more robust than the others. However, it could get uglier before it gets better.
Among the cryptos that I’ve covered on this list, only Litecoin has managed to put up a positive candlestick or a session trading above the prior session’s “close.” Of course, no one should read too much into this phenomenon as it could be a fleeting one.
Still, it does provide a key lesson. Crypto proponents are among the most passionate investors you’ll ever meet, which means that if the whales or institutional players want to take down the blockchain market, they’ll have to bring out the howitzers.
But is mere passion alone enough to save Litecoin and other cryptos from entering a dark winter?
As with several other competing virtual currencies, the sudden volatility took LTC-USD below its 200 DMA, which represents longer-term support. That leaves the coin barely hanging above the 50 DMA, which currently sits at around $165. Frankly, this level has to hold for contrarians to have a measure of confidence. Below that and momentum will favor the bears.
Since the spring correction this year, Litecoin’s volume trends have been mostly weak. Therefore, I would be cautious about lower prices in the near term.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA, XRP, DOGE, LINK and LTC. 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.