7 Cryptos to Watch as All Eyes Shift to the Federal Reserve

cryptos - 7 Cryptos to Watch as All Eyes Shift to the Federal Reserve

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On a lazy Tuesday afternoon, I checked the prices on the cryptocurrency market to a stunning result. Just on one meme coin, I was a multi-billionaire! Of course, it was a fleeting moment. And I knew — along with everyone else — that something was going on. Look, as popular as emerging cryptos like Avalanche (CCC:AVAX-USD) are, there’s no way one of those coins is going to sell for $7.3 billion.

As our own Brenden Rearick put it, “It appears that the CoinMarketCap website is experiencing a glitch; the site’s showing off massive crypto spikes and sending investors into a state of major confusion.” Certainly, I hope no one rage-quit their jobs because the moment was simply too absurd to be taken seriously. At the same time, the “miracle” run up in cryptos gave us all some time to think about the sector’s bigger lessons.

As one person in the comments section of a Gizmodo article put it, “look at it this way, if everyone is a trillionaire, then nobody is a trillionaire.” In my mind, you couldn’t get a more pointed criticism of the sociology of cryptos than that quote.

As automotive enthusiasts know, Ferrari (NYSE:RACE) deliberately limits production of its exotic cars. If everybody has a Ferrari, then no one has a Ferrari. In other words, you should be skeptical about anyone proclaiming they want everybody to be rich. Because if that was the case, who would clean our toilets, wash our vehicles or deliver our meals? And the world of cryptos is no different.

Don’t let the decentralization narrative fool you. Just as you have no friends on Wall Street, you especially have no friends in the virtual currency sector, where morality itself is a decentralized concept. So be vigilant with cryptos, even the mainstream ones below:

Don’t misconstrue the above as a communist manifesto. Rather, the point is to be even more ruthless when conducting your digital asset trades. Remember, clearly defined rules exist on Wall Street. With cryptos, it’s much more of a Wild West ecosystem. Therefore, cold rationality is the name of the game.

Cryptos to Watch: Bitcoin (BTC)

A Bitcoin (BTC) coin sitting on a mossy piece of wood.

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At the time of writing, Bitcoin is trading hands at around the $47,000 level — not $808 billion as CoinMarketCap stated earlier. Not that I would complain about it. Then again, I probably would. Since such a price would entail more money than exists in the universe, something desperately wrong must have happened to the U.S. dollar, which is the more believable outcome.

As a recent New York Times article warned, consumer prices increased at the fastest pace since 1982. As they say, there’s no such thing as a free lunch.

Sure, stimulus may be the only choice that the Federal Reserve had to mitigate the coronavirus disaster. But anybody who knows anything about economics knows you can’t just increase the supply of money without decreasing its value. Therefore, concerns are running sky high that the Fed will scale back its stimulus and take major steps toward rate hikes.

If so, you’ve got to watch Bitcoin’s price chart since it’s trending weakly above its 200-day moving average.

Ethereum (ETH)

A concept image of a virtual coin based on the Ethereum logo.

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Typically, altcoins represent the higher reward potential within cryptos but at a cost of higher risk. But so far, the most valuable altcoin by market capitalization, Ethereum, has held its own quite well. For instance, over the trailing month, Bitcoin dropped nearly 26% of value. On the flipside, Ethereum shed over 17%.

Granted, double-digit losses are never fun to absorb at the time, irrespective of what people say on the internet. But if I had a choice, of course, losing 17% is a relatively more palatable situation than losing 26%. In addition, Ethereum is up nearly 16% against its 200 DMA at time of writing. That also compares favorably to BTC, which is only 1% above its 200 DMA.

Still, I’m concerned about the direction of cryptos if the Fed decides to remove the monetary punch bowl. As you know, investors have recently lost their appetite for risk-on assets because the rise of borrowing costs makes speculative ventures much riskier.

Plus, you’ve got to figure that the institutional players that moved into cryptos are not going to hold on for dear life (HODL). So again, watch this space carefully.

Cryptos to Watch: Binance Coin (BNB)

Binance (BNB-USD) logo displayed on a pile of altcoins

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At first glance, Binance Coin appears to have a similar chart to Ethereum on a trailing one-year basis, and your eyes aren’t playing tricks on you. In the past month, BNB has shed almost 17%, which is very similar to ETH’s loss of 16% during the same time period.

Part of the reason for Binance Coin’s resilience relative to Bitcoin could be due to the underlying exchange. At first, early pioneers like Coinbase (NASDAQ:COIN) dominated the crypto exchange space because it commanded a marketing monopoly, if you will. For the boomers and the luddites, Coinbase makes more intuitive sense.

But as cryptos blossomed into a mainstream concept, consumers started looking for alternatives. Not only did Binance provide said alternative, it also offers significantly more coins and tokens, per a report from The Balance. With over 15,600 digital assets available for trade as I write this — the only inflated figure I’m going to trust from CoinMarketCap for the time being! — more is simply better.

Nevertheless, the issue with BNB is that if cryptos tumble, exchanges will likely take a hit. Therefore, keep close eyes on economic developments.

Tether (USDT)

A concept token for the Tether (USDT) cryptocurrency.

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One of the most controversial cryptos, Tether is arguably the most popular stablecoin — a digital asset pegged to the U.S. dollar. As a result, you don’t really make money off Tether in the normal sense of the phrase. Instead, you use Tether primarily to park profits while maintaining a strictly crypto position.

For instance, Bitcoin was once approaching the $70,000 level. At $47,000, a drop from $70,000 would represent a nearly 33% loss. Now, had you anticipated that such a correction were to occur, you could either cash out in cash or pocket your profits in Tether (or another stablecoin).

Please note that I’m not giving financial nor tax advice. But as an idea, a person could theoretically avoid triggering a crypto-to-fiat-currency transaction (and thus alerting the IRS) by selling BTC directly in Tether coins.

And also as a completely fabricated narrative which I am absolutely not recommending whatsoever, the imaginary person above could go to Myanmar. Apparently, its shadow government now accepts Tether as an official currency.

It’s a bizarre development, but it could also point to the future of geopolitics among less-developed nations. If you’ve got an inquisitive mind, watch this space.

Cryptos to Watch: Solana (SOL)

Concept art of the Solana (SOL-USD) blockchain.

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Out of the cryptos listed in the top 5 by market cap, Solana posted the highest 24-hour performance metric as of this writing — and it’s not even close. Up nearly 8%, SOL might provide much-needed confidence to a sector that’s been on the wrong end of a beatdown lately.

However, as is the case with so many virtual currencies, there’s an ongoing battle between the fundamentals of the blockchain and get-rich-quick sentiment. A pioneer of the proof-of-history protocol, Solana adds an extra layer of safety and trust for decentralized trustless networks. By verifying transactions on the basis of time, Solana users have far greater assurances of legitimate blockchain activity.

But does this matter to market participants of the SOL coin? On one hand, it should, because through Solana’s innovation, it’s much easier to extract credibility from decentralized finance (DeFi) applications. After all, a trustless mechanism is no good if users don’t trust the outcome to begin with.

On the other hand, people are anxious about risk-on assets. Since you’re not going to get any more dangerous than altcoins, you should take a cautious approach with Solana.

Cardano (ADA)

Cardano (ADA) token with blue and orange digital background.

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While I’m hesitant to give firm ideas about many cryptos due to the ambiguity of the surrounding environment, with Cardano, I’m much more straightforward. Based on its technical profile (as in technical analysis, not blockchain technology), I only have one thing to say: It’s do or die for ADA.

Throughout this year until November, Cardano coins only slipped below their 200 DMA once, during the July correction. However, in the second half of that month, cryptos made a remarkable recovery, sending Bitcoin near the aforementioned $70,000 level. But the jubilance gave way to an ominous feeling as the omicron variant and fears of Fed tapering deteriorated sentiment.

While virtually all cryptos suffered under the shifting currents, Cardano has been particularly bruised. Since Nov. 20, ADA has been trading below its 200 DMA on a consecutive basis. If that wasn’t bad enough, the 50 DMA has recently crossed underneath the 200, sending a very ugly signal.

In fact, technical analysts refer to the above dynamic as a “death cross.” While I’m not writing Cardano’s obituary, it really does need to show some upside strength right quick.

Cryptos to Watch: Dogecoin (DOGE)

A close-up shot of a Shiba Inu with a grinning face.

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Everyone’s favorite meme coin, it got a strong helping of investor sentiment from — who else? — Elon Musk of Tesla (NASDAQ:TSLA). According to InvestorPlace contributor Joel Baglole, Musk stated that “some of the automaker’s ‘merch’ can now be purchased with Dogecoin. Its merch includes the $150 Giga Texas belt buckle featuring the carmaker’s logo. ‘See how it goes,’ Musk tweeted.”

On a wild day of trading on Dec. 14, Dogecoin briefly jumped 25% higher. Must be good to have Elon Musk as your backer.

As Baglole mentioned, “DOGE has no underlying utility or function. Musk’s comments about Dogecoin, which have included calling his interest in the digital asset a ‘hustle,’ have been largely responsible for propping up the digital coin.”

It’s a pretty convincing argument. However, since the meme coin community is so strong (and stubborn), you really don’t know what’s going to happen in this space. For those who can’t handle the heat, move to the sidelines.

On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, ADA 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.


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