Perhaps no other financial sector is as cruel as cryptocurrencies. Late last year, the segment, which had been left for dead by mainstream media sources, enjoyed a dramatic rally, reaffirming international enthusiasm toward blockchain-technology-derived coins and tokens. Following a record-breaking surge in the spring, virtually all cryptos encountered a steep correction, sending shivers to all but the most battle-hardened investors.
After pinging some very worrying technical indicators heading into the back half of July, the sector once again roared back to life. A nagging question then entered many people’s minds: why the flying truck couldn’t the segment do this earlier? Whatever the answer, it appeared that cryptos were about to climb a wall of worry. And then, it happened again.
After several cryptos were on the verge of closing in on their record-breaking plateaus from this past spring — with a few hitting all-time highs — the segment again encountered severe headwinds, with the whales or the major holders of digital assets trimming their portfolios. The initial selloff in early September and the ongoing one have both left the segment looking pensive.
Of course, that’s no guarantee that the blockchain market is about to head lower. Time and again, we’ve seen cryptos register ugly chart patterns that would have stock market technical analysts urging their clients to hit the bid. But virtual currencies seemingly have their own rhythm, which makes sense. This is the only financial arena that’s completely democratized and available for trading 24/7/365.
However, we may also be at a crossroads. While we celebrate the idea of holding on for deal life (HODLing) or white-knuckling our positions in the face of catastrophe (diamond hands), the reality is that few Americans own cryptos, per the New York Times’ Binyamin Appelbaum.
As a result, investors may not be able to rely on the masses to support these digital assets on watch for this week:
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Cardano (CCC:ADA-USD)
- Dogecoin (CCC:DOGE-USD)
- Algorand (CCC:ALGO-USD)
- Tezos (CCC:XTZ-USD)
- Bitcoin Cash (CCC:BCH-USD)
At this hour, I’m loathe to give hardline buy-sell ideas because we’re at a fork in the road. Whether the recent downgrade in cryptos represents a buying opportunity or not depends entirely on your risk tolerance. For those that can’t stand the heat, you’ll want to be extremely careful about moving forward.
Cryptos to Watch: Bitcoin (BTC)
When it comes to the king of all cryptos, I can’t help to think that Bitcoin is suffering from a bout of buy the rumor, sell the news. Personally, I believe it’s like anything in life — the fantasy is always better than the reality.
For instance, most folks aspire to achieve a major milestone, such as securing the dream job you’ve been working and studying hard for or buying your first home. While the euphoria tantalizes you for the first few moments, at some point, the dream gets shelved into the backdrop of the mundane.
From there, it’s onto bigger goals and aspirations — and should you reach them, the cycle repeats. The lack of substantive and lasting fulfillment is the core reason why religion still flourishes in the age of science and agnosticism.
How does this relate to Bitcoin and other cryptos? Leading up to El Salvador becoming the first country to adopt BTC as a national currency, several proponents loved the concept because it legitimized digital assets. However, the administrative realities forced people to wake up to the consequences of such a move.
Technically, Bitcoin needs to break convincingly above $47,000 for traders to feel comfortable. Otherwise, it’s time to be ultra-cautious.
Ranked as the number-two cryptocurrency by market capitalization, I don’t expect Ethereum to lose its status for a very long time, if ever. Not only does ETH track Bitcoin prices well, it’s also shown to be more resilient than the top dog. For instance, back in the 2017 boom-bust cycle for cryptos, ETH was still making headway up until January 2018. It’s the same circumstance this time around, with Ethereum’s price holding desperately onto the $3,000 level.
Still, we’ve also seen where eventually, ETH comes back down to earth — just like the rest of the cryptos. So the question is, can the number two digital asset disassociate with the bearishness impacting other coins and tokens or will it eventually succumb to the broader market pressure?
At present, Ethereum is trading above its 50- and 200-day moving averages, which is an encouraging sign. What’s not so confidence generating, though, is the volume level. Relative to the rallies printed earlier this year, the magnitude of acquisitions have not been satisfactory. This dynamic leaves open the possibility that ETH could suffer a correction. Therefore, keep your eyes wide open.
Cryptos to Watch: Cardano (ADA)
Though Bitcoin and Ethereum dominate the headlines, for regular folks who are just now considering the opportunity in cryptos, they pose a psychological challenge. Putting down a thousand bucks into BTC right now would yield you an equity share of 0.023 units — hardly a sexy figure.
Even with Ethereum, you’re talking about owning 32.4% of one whole unit. It’s just not how we humans are wired when we think about investment equity.
But put that same dollar amount into Cardano and you’re talking about 464 coins as I write this. And it was closer to 1,000 coins about two months ago, driving home the potential profitability narrative of ADA. That at least had a part in Cardano’s popularity.
As such, the digital coin drove to an all-time record high at the beginning of September, making it a rarity among cryptos. But can momentum continue taking ADA northbound?
Admittedly, in my crypto update a couple weeks ago, I stated that I feared for ADA in the near term and thus ended up selling a significant stake. Despite a few swings higher, my premonition has so far been proven correct. If you want to know my opinion, I’m still cautious due to the ugly technical profile.
Usually, the InvestorPlace audience is good about accepting various points of view regarding particular investments — it’s impossible that everyone believes the same way about anything, let alone financial vehicles like cryptos. But write something that the public perceives to be too harsh and that same reasonable audience will hunt you down and make you pay.
Believe me, I’ve been on the receiving end of quite a few unsolicited colorful emails.
That said, I don’t think I’ve ever received any criticism of my work regarding Dogecoin. Even though I’ve published my bearish thesis on several platforms, I still have heard nothing. I’m tempting fate here, but if I had to guess, it’s probably due to an underlying acceptance that DOGE is extremely speculative.
At least, I hope that’s the case. You really shouldn’t put any more money in Dogecoin than you can afford to lose, because you probably will.
However, I must give respect for the DOGE bulls for keeping positive sentiment alive. If you’re thinking about trading this coin, be aware that its 50 day moving average stands at just under 27 cents. Ideally, DOGE should reach 30 cents to have any semblance of upside confidence.
Cryptos to Watch: Algorand (ALGO)
Not everything related to cryptos suffered in the recent whale-related selloff. Case in point is Algorand. Billed as a “self-sustaining, decentralized, blockchain-based network that supports a wide range of applications,” Algorand hit a bottom of just under 70 cents during the July doldrums. But from then onward, ALGO went positively ballistic.
One of the bewildering aspects about cryptos that I don’t think I’ll ever get over is the strange feeling that even your dumbest mistakes can be corrected with patience. Mine was buying into Algorand at an average price of $1.38. At the July low of around 67.8 cents, I essentially cut my portfolio in half.
After forgetting that I had even owned units of what I then called junk coins, suddenly, I was handsomely profitable. So, do I think ALGO can keep moving the train along?
In a word, no. The technical posture simply doesn’t look very inviting in the near term. Therefore, I converted a significant portion of my Algorand holdings into stable coins, while keeping enough ALGO on hand to play with house money in case my bearish thesis is wrong.
Frankly, this approach of knowing when to fold ‘em is the only way to survive the whiplash of cryptos.
Another crypto coin that managed to move against the grain in a substantial manner is Tezos. While the benchmark Bitcoin only gained 9% over the trailing month leading up to Sept. 17 (just before its recent drop), Tezos coins delivered an astounding return of 88%. Much of the enthusiasm could be related to its fundamentals. Per CoinMarketCap’s description:
“Tezos is a blockchain network that’s based on smart contracts, in a way that’s not too dissimilar to Ethereum. However, there’s a big difference: Tezos aims to offer infrastructure that is more advanced — meaning it can evolve and improve over time without there ever being a danger of a hard fork. This is something that both Bitcoin and Ethereum have suffered since they were created. People who hold XTZ can vote on proposals for protocol upgrades that have been put forward by Tezos developers.”
I can see how this appeals to blockchain advocates: both Bitcoin and Ethereum suffered setbacks and controversies over their respective hard fork incidents. But is a forkless chain enough of an innovation to keep XTZ coins charging higher?
Personally, I think you must defer to common sense on this one. After rocketing so quickly, Tezos is probably due for a correction.
Cryptos to Watch: Bitcoin Cash (BCH)
Speaking of hard forks, Bitcoin Cash was among the most controversial. When the original Bitcoin first came onto the scene, it sparked a revolution for those who had the foresight in realizing the underlying blockchain technology’s potential for decentralized financial applications.
Over time, though, it became readily clear to everyone that the BTC network was no longer qualified to be a workhorse. Instead, the former junior infantry officer was going to get a promotion to brigadier general and thus, a cushy Washington desk job. What was needed on the front lines was a quick, efficient and economical network protocol.
Failing to reach a consensus on solving Bitcoin’s laggardness, a hard fork materialized and Bitcoin Cash was the result. Though it managed to handle the workload in a far superior fashion than the original BTC, Bitcoin Cash never seemed to capture much popularity.
I’m afraid this also has translated into market dynamics. At the time of writing price of $552, BCH has been a disappointment. I’m going to hold onto my stake just to see where this story ends up but objectively, I think there’s a high risk that Bitcoin Cash meanders aimlessly for a while.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA, DOGE, ALGO and 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.