Though the decentralized blockchain and the subsequent cryptocurrency revolution represents one of the most groundbreaking technologies of our time, the sector’s viability amid severe geopolitical flashpoints has been an open question. So far, cryptos have handled themselves relatively well, but how long can this market hold out?
On one hand, soaring consumer inflation which will likely worsen over the coming months — in large part due to President Joe Biden’s recent announcement to ban U.S. imports of Russian energy possibly creating a domino effect — should benefit at least reputable cryptos. As decentralized assets, they’re not subject to the same inflationary pressures of fiat currencies, making them quite attractive now.
On the flipside, cryptos still have a ways to go before achieving widespread mainstream integration. For instance, while the U.S. is a major player now in digital assets, a Pew Research Report from November 2021 revealed that 16% of Americans have invested in or otherwise used cryptos. Simultaneously, this is a sizable figure and an inadequate one in terms of imparting broader influence.
In my view, it’s important to adopt an objective view of blockchain-based assets before putting up a sizable financial position. Certainly, cryptos have demonstrated an ability to bounce back from their doldrums (per the market capitalization chart I’ve included), thus bolstering the idea that the current funk represents a temporary lull.
However, it’s also important to realize that virtual currencies have been languishing near the lower range of a rising trend channel that began around early 2021. If digital assets cannot mount a robust rally soon, shaky investors may head toward the sidelines. Either way, it’s a trying dilemma that will affect the below major cryptos:
- Bitcoin (BTC-USD)
- Ethereum (ETH-USD)
- Tether (USDT-USD)
- Terra (LUNA-USD)
- Cardano (ADA-USD)
- Solana (SOL-USD)
- Dogecoin (DOGE-USD)
On balance, it’s possible that cryptos with a consistent track record could see an influx of money as investors look to protect their wealth. While the dollar isn’t heading toward hyperinflation — at least not yet — it’s definitely on the path to losing purchasing power. Still, the narrative can go either way, so it’s best to remain vigilant.
Cryptos to Watch: Bitcoin (BTC)
The benchmark of all cryptos, Bitcoin stands at a perplexing crossroads. Early this month, Bitcoin traded hands at around the $44,000 level, a conspicuous rally from the lows BTC succumbed to at the beginning of the Russian invasion of Ukraine. However, on the afternoon of March 8, the king of cryptos again found itself below the psychologically significant $40,000 level; thus, its recent spike above this point may draw skepticism.
As with the chart near the top depicting the total market capitalization of all virtual currencies, Bitcoin is likewise trending in the lower range of a long-term trend channel that began in late 2020/early 2021. Presumably, then, BTC bulls will need to spark a sizable move northward to inspire confidence. Otherwise, the weak hands of the market could inflict selling pressure.
Seeing as how the global economy is looking shaky — just look at the major indices of the U.K., Germany and Japan as examples — Bitcoin may attract those seeking to preserve purchasing power. Then again, the deflationary impact of the conflict zone could ripple everywhere, so investors need to stay on guard.
While Ethereum is best known as the cornerstone of blockchain-based projects, ETH is likely receiving attention right now as an alternative wealth-securing (and possibly building) asset class. True, nothing quite shines like precious metals during periods of intense fear and rising consumer costs. Plus, you have the benefit (assuming bullion acquisition) of physical ownership.
As the old meme goes, you don’t own it unless you hold it. So that’s one major plus for the metals.
On the other extreme end of the equation, we saw that during periods of intense turmoil, regular folks don’t have the ability to escape cleanly and effectively. Even the lucky ones that did escape Ukraine, for instance, now face logistical and legal hurdles regarding visas. In such moments, you don’t need to be carrying around any more weight than absolutely necessary.
Thus, it’s quite possible that Ethereum could rise higher, along with other cryptos. But the same concerns about Bitcoin also apply to ETH; namely, the digital asset must show something, anything, to inspire shaken investors.
Cryptos to Watch: Tether (USDT)
According to the Competitive Enterprise Institute, stablecoins — or cryptos that are pegged to a stable national currency (typically the U.S. dollar) — have come of age. I couldn’t agree more. As the CEI mentioned, digital assets like Tether originated as a mechanism of convenience. Rather than constantly reverting back to fiat currencies, crypto traders could stay in the decentralized ecosystem, using USDT and its ilk as valuation placeholders.
Over time, people recognized their utility for a variety of applications, largely to undergird various decentralized economies and ecosystems. Right now, the relevance has shifted toward alternative payment mechanisms and as a source of wealth stabilization.
For instance, the Wall Street Journal noted that Russians are now unplugged from the global financial system. To get around sanctions, they must find alternative assets that are not touched by punitive measures. From a convenience and technological standpoint, reputable stablecoins provide an effective solution.
Still, investors must be careful, because Tether specifically has long faced questions about currency reserves to back up its USDT outflows. But if your own currency is facing severe devaluation, USDT probably looks very attractive.
For the ultimate in wealth protection — at least as far as volatile cryptos are concerned — many investors have turned to Terra. According to CoinMarketCap, Terra is a blockchain protocol that uses stablecoins — which again are typically pegged to the greenback — to “power price-stable global payments systems.”
In other words, Terra combines the stability and adoption of hard fiat currencies with the censorship-resistant power of Bitcoin. Additionally, the system undergirding LUNA offers fast and affordable settlements. So far, the evidence speaks for itself. On the afternoon of March 9, LUNA was up 16% in the previous 24 hours, the strongest performance among cryptos ranked in the top 10 by market cap at the time.
As conditions potentially start to worsen not only in Eastern Europe but throughout the world, Terra could enjoy safe-haven demand. Again, nothing shines like the precious metals sector. However, physical bullion is bulky, and it’s not quite as fungible as you might think. After all, fake bullion remains a not entirely insignificant issue in the precious metals industry.
On the other hand, cryptos deploy trustless security mechanisms so they might be able to withstand certain crises, though that’s far from a guarantee.
Cryptos to Watch: Cardano (ADA)
On many levels, it’s difficult not to root for Cardano. As one of the pioneers of the more energy-efficient proof-of-stake protocol, Cardano isn’t merely a vehicle for speculation; the underlying project has brought intriguing innovations to the blockchain space. But it’s also true that ADA has benefitted many early traders of cryptos.
Now the question is, what next? On the surface, Cardano seems to be a relative discount considering that the coin was trading hands near $3 in late August to early September of last year. But despite some valiant efforts to instill positive momentum in the trade, ADA continues to track bearishly.
From the perspective of technical analysis, Cardano’s 50-day moving average has consistently represented an upside barrier to the coin since October 2021. Nothing’s really changed since then; if anything, circumstances are worsening for ADA.
And now that Cardano has slipped below the all-important $1 level — and has had trouble regaining the threshold — I have great concerns that there could be more pain ahead before a recovery occurs.
Solana is a tough one to call. On the positive front, the underlying project is filled to the brim with innovation. As you probably know, while Ethereum may be the backbone of blockchain applications, it’s not guaranteed to hold onto that title. With network transaction fees (called gas) spiking higher, many developers have been seeking out alternatives. Solana is one such option.
Thanks to a combination of speed, scale and security — all while keeping costs down to a minimum — Solana has become the platform of choice for developers tired of dealing with rising network fees. Naturally, the utility of the SOL architecture brought many speculators into the mix, driving up the underlying coin to incredible heights.
Keep in mind that when Solana first launched, it could be had for mere cents. At the time-of-writing price approaching $90, it’s a bit of a different story today.
Still, investors will want to be careful in their approach. Like Cardano, Solana’s 50 DMA has represented upside resistance. Therefore, its future trajectory remains murky.
Cryptos to Watch: Dogecoin (DOGE)
While it may be a meme coin, Dogecoin is still one of the major cryptos if only for its intense popularity. But this popularity extends beyond its global fanbase. As notable figures like Elon Musk of Tesla (NASDAQ:TSLA) are all too quick to chime in, DOGE could be a key participant in the next generation of payment ecosystems.
Heck, you can even buy certain merchandise from Tesla using Dogecoin. While it may be just a tad more than a publicity stunt, this is nevertheless high praise for a digital asset that started life as a joke.
But it’s also possible that Dogecoin is no longer a laughing matter. While I wouldn’t put all my eggs in this basket, you also got to look at what’s going on in the world. With the Russian ruble tumbling and the Moscow Exchange being closed since Feb. 25, I can tell you one thing: I’d rather have me some DOGE than Russian fiat.
But are these circumstances enough for Dogecoin? Given that it’s still mired in a bearish trend channel, prospective buyers may be better served waiting before making a hefty wager.
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.