Admittedly, over much of the time during this cryptocurrency rally, I’ve offered philosophical takes regarding this sector, mainly because I believe we’re entering uncharted territory of speculation. Believe it or not, my priority is to advocate for our readers. Recklessly participating in cryptos invites danger. But when it comes to Sandbox (CCC:SAND-USD), I’m much more lucid: if you want to participate, wait.
As you know, the crypto market is taking a page out of the equities sector, which suffered a beatdown over concerns about how the Federal Reserve will battle the blisteringly accelerative inflation rate. Logically, if the Fed decides to take away the punch bowl of monetary support, that’s not going to appeal for risk-on assets. This category of course includes cryptos like Sandbox and the entire digital asset complex.
It’s not so much that higher rates are negative for growth stocks and other sentiment-fueled publicly traded opportunities. Rather, investors – under the principle of economic rationalism – will park their money toward sectors that feature an ideal risk-reward profile. Much of the reason why investors clamored for growth names and cryptos during the new normal is to hedge against the inflation that everyone’s worried about now.
Nevertheless, if you have a long-term framework with Sandbox and related projects, the coronavirus pandemic and its associated ills will eventually give way. Thus, SAND-USD could represent a viable discount.
Fundamentally, proponents have a solid case. To make a long story short, Sandbox leverages blockchain technology to facilitate an economic ecosystem for the video gaming sector. Through combining blockchain innovations like decentralized autonomous organizations (DAO) and non-fungible tokens (NFTs), Sandbox aims to create an incentivization structure.
Such structures are known as play to earn, enabling both users and content creators to build digital wealth.
Sandbox on the Cusp of a Grand Discount
Although the concept of decentralized gaming is a groundbreaking one, it’s groundbreaking for the users – not so much as an economic principle. Sure, any endeavor can now be technically decentralized from fiat-currency-issuing government systems. But unless Sandbox or any other platform develops a token with universally recognized value, the narrative (again, the economic component) falls apart.
Cryptos basically run parallel to the Soviet Union, ironically enough. Essentially, the Soviet Union (though a centralized authority) represented for a long time a viable alternative to western-style capitalism. Indeed, the Soviets had their own ruble as currency. It was a legitimate economy until it wasn’t. And I would argue that lack of broader integration doomed the grand communist experiment.
I hope that the same fate doesn’t befall Sandbox, but that’s a different topic for another day.
What I don’t like about buying Sandbox at the present juncture is the technical profile. This time, I’m referring to technical analysis, not blockchain technology. When I see the chart for SAND, I recognize a familiar pattern.
From late October to late November of this year, Sandbox skyrocketed from under a buck to well over $8. Basically, this token jumped by 10x and some change in one month. But since then, it has sharply given back much of its gains. And I fear more corrections are on the way.
How come? Well, it’s the same trajectory that Dogecoin (CCC:DOGE-USD) – which I own, for full disclosure – suffered. DOGE skyrocketed in May 2021, only to sharply correct and then enter a frustrating sideways consolidation channel.
Shiba Inu (CCC:SHIB-USD)? Same thing. Skyrocketed into late October and sharply corrected thereafter. It too appears like it’s going to enter a consolidation channel.
Hopefully, Patience Will be Rewarded
I don’t have a crystal ball, so I want you to take these words with a grain of salt. However, I think it’s very possible that the two meme coins I mentioned above may eventually form what technical analysts call a rounding bottom or saucer pattern.
To provide a succinct description, the assets in question absorb all negativity. Once the bears have exhausted themselves, the badly bruised bulls slowly enter the market, gaining confidence as the underlying assets charge higher.
Now, that could be wishful thinking so again, take it with a grain of salt. Nevertheless, given that other cryptos have demonstrated a similar pattern of fierce corrections following a spike rally, I would avoid buying Sandbox right now. Give it some time – a few weeks, maybe a few months – for clarity before making your move.
On the date of publication, Josh Enomoto held a LONG position in 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.