Don’t look down! That’s the common motivational cry that folks will yell when you’re literally headed toward a vertical milestone. But of course, it’s inevitable that we all look down — it’s only a natural reaction. This is a similar circumstance to what’s going on with cryptocurrencies right now. True, it’s fun being a bull. But one can’t help feeling that cryptos may well be overstretched.
Sure, no one wants to hear the cries of a “Negative Nancy” during a bull market. However, I think it pays to take a breather every now and then. For instance, while cryptos have been on a meteoric rise, no investment can climb indefinitely. Corrections happen — and with digital assets, they tend to be severe.
There are also legitimate concerns that cryptos may incur downside at some point in the near future. For example, fellow InvestorPlace contributor Robert Lakin tuned me into a piece in IR Magazine which noted that some investors may not fully realize the stakes:
“Retail investment has boomed over the last 18 months, with millions of new brokerage accounts opened and investment ideas becoming a popular topic of conversation on social media networks like Instagram and Reddit. But regulators are worried that new investors may not understand the risks they are facing.”
Notably, a majority of respondents conducted by the U.K.’s Financial Conduct Authority (FCA) revealed that the “majority of respondents who invest in forex (57 percent) and cryptocurrency (69 percent) incorrectly think these products are regulated by the FCA.” Further, the driving force behind cryptos and other speculative bets may stem from competition among friends and family. It wouldn’t be a stretch to assume at least some of this sentiment applies to U.S. investors as well.
Over the last few weeks, I’ve noticed some crypto proponents becoming irritated with bears. But don’t let peer pressure and FOMO (fear of missing out) lead you into bad decisions. Instead, always exercise caution. Because what goes up can — and will — come down.
Here are seven cryptos to watch moving forward:
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Binance Coin (CCC:BNB-USD)
- Cardano (CCC:ADA-USD)
- Dogecoin (CCC:DOGE-USD)
- Uniswap (CCC:UNI-USD)
- Shiboki (CCC:SHIBOKI-USD)
Cryptos to Watch: Bitcoin (BTC)
When it comes to Bitcoin — the benchmark of all cryptos — there are currently two main schools of thought.
First, since BTC retook $60,000, it has impressively maintained that level aside from some minor blips. So, you could say that the bulls are building a baseline of support for what has been previously unthinkable: $100,000 per coin.
On the other hand, though, I can’t help but think that Bitcoin has jumped the shark, at least for the time being.
I hardly watch football nowadays, so the news that Green Bay quarterback Aaron Rodgers has essentially become a Bitcoin spokesperson came out of left field. But Rodgers is not the only mainstream figure embracing BTC. Now that begs the question: has this mania gone too far?
Make no mistake — I’m a supporter of BTC and cryptos in general. As I’ve said over and over, Bitcoin has changed my life for the better. Still, I’ve got to be objective. The enthusiasm here has gone over the top. That doesn’t make for a comfortable proposition.
For quite some time, all the attention was on Bitcoin and its dramatic rise. However, Ethereum — the number-two cryptocurrency by market capitalization — wasn’t too far behind. ETH lingered below the $4,000 level until mid-October, when it likewise set a new high. Is this a turning point for the major cryptos?
It’s possible. But the problem I see moving forward are the institutional players that have moved into this sector. Initially, their presence was welcome — they lifted other cryptos to incredible heights. However, unlike your traditional supporter of digital assets, you shouldn’t expect institutional investors to “HODL” or hang on for dear life.
Instead, mainstream funds answer to their stakeholders. Should Ethereum and other cryptos get squirrely due to their possible bubbly nature, institutional investors wouldn’t think twice about dumping and securing their profits in — gasp! — fiat currency.
In other words, it’s very possible that the decentralized market could incur a boomerang effect. I’m not guaranteeing this will happen, but really anything can happen in this sector.
Cryptos to Watch: Binance Coin (BNB)
One of the biggest success stories in cryptos is BNB. At its inception in 2017, Binance Coin was trading hands for about a dime a pop.
If you want to talk about life regrets, not getting involved with BNB is a big one of mine. But now the fear of missing out a second time has people jumping on BNB today, even at price tag of around $550.
Certainly, Binance Coin has strong marketing appeal. Tied to its namesake cryptocurrency exchange, it’s one of the biggest in the world based on daily trading volume. According to CoinMarketCap, “the idea behind Binance’s name is to show this new paradigm in global finance — Binary Finance, or Binance.” It’s a great story. And with Bitcoin up in the high five digits, the theory is now that BNB could likewise be undervalued against a longer-term framework.
Of course, I’m not going to debate the issue. However, the extreme enthusiasm for BNB worries me because cryptos have never been anything but cyclical. Talk to me about binary finance all you want. Unless blockchain-based applications become universally appealing, it’s hard to be comfortable with this name’s rich premium.
If there’s a canary in the coal mine regarding cryptos, it could be Cardano. Once the world’s third-largest digital asset by market cap, BNB has since displaced it. Currently, ADA holds fifth place — and even that’s not guaranteed with Solana (CCC:SOL-USD) right on Cardano’s tail as of this writing.
Still, relative underperformance is just one piece of the cautionary tale here. The other side of the story? This underlying blockchain project is groundbreaking, essentially delivering the first proof-of-stake (PoS) protocol. In short, PoS blockchains reward miners with a greater stake in the network a higher probability of accruing financial resources.
Today, PoS protocols are all the rage because of their minimal environmental impact relative to energy-intensive proof-of-work (PoW). However, that hasn’t helped ADA-USD, which remains curiously underwhelming compared to other high-flying cryptocurrencies.
Yes, ADA popped higher recently — but that only brought its price to previously established thresholds. If Cardano can’t convincingly move the needle going forward, you might want to check up on other digital assets instead.
Cryptos to Watch: Dogecoin (DOGE)
Everyone’s favorite meme, Dogecoin has arguably enjoyed the most interesting ride among cryptos. Initially developed as a joke, DOGE took on a life of its own this past year. The cryptocurrency gained mainstream notoriety (or infamy), with proponents like Tesla (NASDAQ:TSLA) CEO Elon Musk even mentioning the crypto on Saturday Night Live.
As the Los Angeles Times pointed out, Musk’s shoutout didn’t go so well for DOGE. But then again, there’s a lesson here for all cryptos. As I mentioned before, it seems like Bitcoin and company have jumped the shark. We now live in a world where professional athletes even want part of their salaries paid in crypto.
At its peak, Dogecoin surpassed the 70-cent mark. But sometimes, when expectations are too high, that’s exactly the time to go contrarian.
Now, that’s not a cue to short cryptos. Surely, the market can stay irrational longer than you can stay solvent. However, it’s worth recognizing the two-sided nature of human emotions — they can create incredible bull markets and spark devastating bear ones.
Despite my recent hesitancy toward cryptos — or more precisely, the rabid speculation toward digital assets — I’ve always been fascinated with the concept of decentralized finance (DeFi). After all, I’m a beneficiary of multiple DeFi protocols, allowing me to collect interest on some of the cryptos I still own.
That said, what’s really neat is — if you’re willing to take some serious risks — you can also accrue interest on stablecoins. These are digital assets pegged to the U.S. dollar, for instance. So long as the institutions backing those stablecoins don’t crumble (which of course is no guarantee), you can earn massive monthly interest payouts.
This brings me to Uniswap, which takes the DeFi step even further through facilitating automated market-maker services. Basically, blockchain technology is such that you can eliminate middlemen entities like market makers, instead replacing them with a decentralized distributed protocol so that anyone can participate and earn rewards.
However, the basic problem here is that market making on cryptos is an undertested concept — particularly because so many digital assets are liable to implode. Further, Uniswap hasn’t been impressive during the meteoric run of BTC.
Still, that could change with one big catalyst. So, if you like living dangerously, UNI might be intriguing enough for you. Just don’t forget that it’s a huge gamble.
Cryptos to Watch: Shiboki (SHIBOKI)
As major cryptos like Bitcoin and Ethereum swing higher to remarkable valuations, you should consider the mathematical implications of risk-reward profiles.
For example, let’s say you have $62,000 burning a hole in your pocket. You could invest all of that into one Bitcoin and hope it hits $100,000. That would profit you $38,000 — not bad for a single trade.
However, you could also wager a much smaller amount of that $62,000 pot into a highly speculative crypto. And under a euphoric bull market, you could profit handsomely on a percentage basis. You could even potentially match the $38,000 profit mentioned above.
With that, I’m going to finish this list of cryptos off with Shiboki. Full disclosure: I had never heard of Shiboki until I did research for this article. Per CoinMarketCap, though, the crypto brands itself as a “mixed breed dog […] on a mission to prove to his parents ‘Shiba’ & ‘Floki’ that he will carry on with their legacies and that his name is destined for greatness as well.”
What the heck? As I said, cryptos have probably jumped the shark. But if you want to milk this sector for what it’s worth, Shiboki is a smaller name that will certainly take your calls.
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On Low-Capitalization and Low-Volume Cryptocurrencies: InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization less than $100 million or trade with volume less than $100,000 each day. That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators. When we do publish commentary on a low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: How to Avoid Popular Cryptocurrency Scams
On the date of publication, Josh Enomoto held a long position in BTC, ETH, ADA, DOGE and UNI. 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.