It wasn’t too long ago that social media platforms were posting all kinds of wild upside price targets for cryptocurrencies. Then the Federal Reserve happened — along with several other headwinds including the ongoing coronavirus pandemic — and the sector lost its mojo. After some reassurances that the negativity was already baked into the sector’s market capitalization, cryptos dropped some more.
Therefore, the hack or glitch or whatever went on with Coinmarketcap.com in the morning hours of Dec. 14 may be the zeitgeist of the virtual currency sector reflecting itself in tangible form. We want the total market cap of cryptos to be $5.5 trillion or whatever it was. Sadly, that’s not the reality. If anything, new headwinds, such as the worsening crisis in Eastern Europe bodes poorly for all capital markets.
Nevertheless, ardent proponents of cryptos are undeterred, as you might imagine. Further, the contrarian bullish case for the sector isn’t as crazy as it might sound. In November 2021, the market cap for all cryptos ended roughly at parity. In December, virtual currencies shed around 16% of value. So far in January, digital assets have dropped 10% after falling 15% at the lowest point.
In other words, there is some evidence (however slight and questionable) that cryptos may have hit rock bottom or are getting close to it. Thus, the present moment could be a buying opportunity.
Adding to the crypto optimism are some mainstream analysts’ thoughts, who see a possibly impending stock market correction eventually weighing down cryptos due to historical correlations between the two asset classes. If so, the weak hands can finally be flushed out of the digestive system, allowing the virtual currency sector to have room to gobble up purely bullish sentiment.
Still, here’s my concern. From peak to trough, the market cap for digital assets dropped 36%. That’s a sizable correction but nothing truly out of the ordinary for the segment. Let’s face it, coins and tokens have been known to drop 80% or more, which is why you shouldn’t get overconfident on these popular cryptos.
- Bitcoin (CCC:BTC-USD)
- Ethereum (CCC:ETH-USD)
- Tether (CCC:USDT-USD)
- Cardano (CCC:ADA-USD)
- Solana (CCC:SOL-USD)
- Dogecoin (CCC:DOGE-USD)
More than ever, it’s vital that you perform your due diligence. Obviously, cryptos represent a highly emotional sector and it feels great to be part of a broader narrative. I get it. But that’s also how dangerous cults start. Therefore, it’s important to make decisions based on how you feel about the asset, not what anybody else thinks.
7 Cryptos to Watch: Bitcoin (BTC-USD)
It only takes a few months for the narrative to change completely in cryptos — just recall the Bitcoin sentiment last year. As BTC-USD was reaching toward record highs in November, many internet pundits called for a quick rise to $100,000: the holy of holies in terms of crazy BTC-USD price targets that no longer sound all that wild.
But it wasn’t just random self-appointed YouTube finance gurus that were pumping up Bitcoin and the cryptos sector. As FXEmpire reported in September 2021, analysts from British bank Standard Chartered predicted that BTC-USD would hit $100,000 soon. Other prominent thought leaders stated that BTC-USD could top the milestone by the end of the year.
Obviously, these projections did not come to pass, which is why you should be careful about recent reports of BTC-USD possibly recovering from this corrective lull. Honestly, it’s the same garbage when it comes to cryptos: when they’re up, they’ll go up, when they’re down, they’ll go up, when they’re sideways, they’ll go up.
It’s toxic positivity personified.
Personally, my take is that this lingering in the low-$40,000 range is not helpful, mainly because you don’t earn dividends (in the traditional sense) with Bitcoin. Therefore, if we don’t see upside momentum soon, don’t be surprised at yet another downturn.
Like clockwork, whenever people present enormous upside targets for Bitcoin, Ethereum is a natural, logical downwind beneficiary. Representing the backbone of utilitarian blockchain-based applications, the underlying digital asset ETH-USD generates organic interest. And as the second-biggest coin by market cap, wherever BTC-USD goes, so too goes ETH-USD.
Indeed, the FXEmpire report that I mentioned earlier mentioned an even wilder target for Ethereum, at least on a percentage-based comparison. While Standard Chartered anticipated a jump to $100,000 for Bitcoin, that would have represented only a little more than a 2x swing. In contrast, the bank also mentioned an Ethereum price target of $35,000 in the medium term.
At the time of publication, such a skyrocketing would have translated to a more than 10x move. As I said, wild stuff.
Needless to say, the tune has really changed on Ethereum as well. Finding itself struggling in low-$3,000 territory, ETH-USD really needs to break into the $4,000 level at minimum (in my opinion) to keep overall bullish momentum alive. Otherwise, outside fears such as the Fed’s signaled hawkish monetary policy could negatively impact ETH-USD along with most other cryptos.
7 Cryptos to Watch: Tether (USDT-USD)
As a stablecoin — or a digital asset pegged to the value of the U.S. dollar — Tether does not attract speculative interest in the same manner that Bitcoin, Ethereum or most other cryptos do. Arguably, Tether’s most important function is to provide quick and convenient liquidity for its users.
Prior to stablecoins, anybody that wanted to secure their profits in Bitcoin had to sell their holdings in fiat currency. Then, if they saw an opportunity to buy back in, they must use fiat to buy BTC-USD. However, the constant back-and-forth from cryptos to fiat is time consuming, expensive and may alert authorities to unusual behaviors. Tether keeps things in the family, if you will.
However, the stablecoin has attracted controversy, most recently when Tether — a centralized company — blacklisted a few Ethereum addresses holding more than $150 million worth of USDT-USD in total, per a report from Cointelegraph.
Tether didn’t disclose the reason why it blacklisted those addresses, although it has taken similar measures in the past to address cyberattacks and help investigations by law enforcement agencies. Naturally, this has attracted criticism since centralization goes against the principles of blockchain-based assets.
Still, when it comes to fighting nefarious uses, centralization has its benefits. Don’t expect this debate to go away anytime soon.
One of the cryptos that I was most concerned about due to its poor technical (as in chart analysis) profile, Cardano has bounced back sharply. As I write this, ADA-USD is the biggest winner among the top 10 cryptos in terms of market performance over the trailing seven-day period. Up almost 13%, no other digital asset in the top 10 comes close.
It’s almost as if Cardano bulls heard my warnings. Previously, I mentioned that was trading around the $1.2 level. This seemed incredibly dangerous as the next logical level of horizontal technical support would place ADA in penny-stock territory. Also, Cardano had been trading under the 50-day moving average (DMA) — a commonly viewed indicator of nearer-term market strength — for multiple sessions.
If that wasn’t bad enough, ADA’s 50 DMA (currently sitting at $1.34) was also well below its 200 DMA ($1.82), which is an indicator of longer-term market resilience.
Reaching around the $1.63 mark before dipping to its present $1.39 level, Cardano has done itself a lot of good. However, investors can’t afford to get too cocky. ADA still needs to reclaim its 200 DMA to restore substantive confidence in the upside narrative.
7 Cryptos to Watch: Solana (SOL-USD)
While Cardano has been the clear winner of this week among top-ranked cryptos, Solana is at risk of being one of the sector’s biggest losers. Don’t get me wrong — this isn’t to impugn SOL-USD. I’m just calling the data as I see it.
Around this time last week, Solana was trading around the $150 range. At time of writing, it’s dipped to a bit below $138. Since we’re talking about cryptos, I’m not fretting over an 8% loss across a one-week period (though it’s a sizable correction). Rather, it’s more that SOL-USD is lacking positive momentum when the sector is absolutely begging for bullish news.
As things stand right now, Solana is sitting on its 200 DMA, which is considerably below its 50 DMA ($173). Because SOL-USD had such a strong year in 2021, you’d expect the nearer-term indicator to be well above the longer-term counterpart. However, the gap between the two is closing quickly. With investors watching such metrics closely, it’s not an insignificant development.
For the bulls, you’re looking for SOL-USD to reach $170 at minimum and stay there. Otherwise, the situation is not looking pleasant.
Since their inception, one of the biggest problems — if not the biggest — for cryptos is their legal status. Featuring elements that appear similar to traditional assets like stocks and commodities but with a decentralized digital platform — there have been decentralized currencies in the past, so to speak — that is unprecedented, the legality issue can be confusing for outsiders.
And just a quick note before you may be tempted to type an angry email: I’m merely saying the general public perceives the legal issue to be confusing. If you personally find clarity in cryptos, that’s wonderful.
But it seems lay observers aren’t the only ones perplexed with the issue. As you may know, the Securities and Exchange Commission (SEC) filed a lawsuit against Ripple Labs, which founded the XRP-USD coin. And that’s one of the problematic challenges with the whole thing — Ripple and certain insiders enriched themselves greatly with XRP-USD, which is what executives of high-flying stocks typically do.
Still, I’m not a legal expert so we’ll see how this controversy plays out. What I can say is that XRP-USD is hurting so it needs to quickly reclaim the 90-cent level to restore much-needed confidence.
7 Cryptos to Watch: Dogecoin (DOGE-USD)
I got to give credit to Elon Musk of Tesla (NASDAQ:TSLA) fame. Although I don’t always see eye-to-eye with the tech entrepreneur, he appears incredibly committed to the broader narrative supporting cryptos. In fact, I’ve personally benefitted from his generous words and actions.
So I’ll say it again, thank you Elon! But also, holy smokes Elon!
As you’ve undoubtedly heard if you’re a follower of cryptos, Musk made noise again when Tesla announced that it will accept Dogecoin for certain “Dogecoin-eligible products.” Just the fact that Dogecoin is printed next to one of the world’s premium domain names — Tesla.com — is a truly remarkable sight to behold.
But will it matter? For a brief moment it did when Dogecoin shot up above the 20-cent level. Unfortunately, DOGE-USD has give up most of the gains, with the time of writing price sitting at around 16.5 cents. Thus, its trailing seven-day return is a mere 3% (actually, slight under 3%).
Coincidentally, the 20-cent mark is also the point which DOGE-USD needs to reclaim to spark broader investor sentiment. Still, it’s discouraging that even with support from one of the world’s biggest companies, Dogecoin can’t sustain the tailwind.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, ADA, XRP 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.