- Cryptos continue to experience volatility amid positive and negative headlines.
- Bitcoin (BTC): Fidelity’s decision to allow BTC in 401K accounts is a massive step toward broader integration.
- Ethereum (ETH): Ethereum’s upgrade to proof of stake has many proponents believing it could become the king of all cryptos.
- Tether (USDT): Although competing stablecoins bring market risks to Tether, its brand presence will be difficult to usurp.
- Solana (SOL): Solana has recently surged as a popular platform has expanded support to the SOL blockchain.
- Terra (LUNA): Terra has made plenty of noise due to its high interest rate payout but this strategy could be risky.
- XRP (XRP): Unfavorable news for the lawsuit-laden XRP may invite volatility in the intermediate term.
- Dogecoin (DOGE): Elon Musk’s takeover of a popular social media platform may draw intrigue to DOGE and other cryptos.
Over the past weekend, the cryptocurrency sector responded to the volatility in global equity markets in tandem, with many stakeholders securing profits ahead of a what may be a wild week in the news cycle. At the same time, some encouraging developments gave enough reason for contrarians to jump back into cryptos, presenting an ambiguous profile for investors.
Top of everyone’s concern is the continued violence in Ukraine. Russian forces are ramping up their invasion, likely to provide some propaganda-worthy victories ahead of the May 9 celebration day commemorating the defeat of fascism. But while that was going on, the French electorate headed to the polls to choose between incumbent President Emmanuel Macron and challenger Marine Le Pen.
Macron eventually emerged the victor, which has serious implications for both the global equities sector and cryptos. Had Le Pen won, her support for Russian President Vladimir Putin threatened to spark discord among European nations regarding the regional response to Russia’s belligerence. Likely, the equities sector also took encouragement at the result, if only because Macron provides some measure of predictability.
Still, the cryptos sector needs additional help to reclaim the $2 trillion market capitalization level, a demarcation point that has acted as both support and resistance during this year. With that in mind, here are some key virtual currencies to watch.
As the original virtual currency that sparked both the decentralized asset and blockchain craze, Bitcoin (BTC-USD) will likely always be the benchmark for cryptos. Historically, Bitcoin sought credibility, with proponents desiring to transition the asset class from a niche category to an institutional reality. And recently, Fidelity Investments came through with a potential gamechanger.
According to the Wall Street Journal, Fidelity plans to allow investors to put Bitcoin in their 401K account, “the first major retirement-plan provider to do so.” It’s a paradigm shift for several reasons, the first being that this will only encourage greater mainstream integration for Bitcoin. I’m almost certain that other funds will follow suit, considering just how popular cryptos have become.
Another important reason why this could help boost the BTC price longer term is security. Simply put, holding onto cryptos is risky because if anything happens — even losing your password — that’s it. Your money could simply evaporate for all intents and purposes. With institutional custody, this risk could be substantially mitigated.
Ethereum (ETH-USD) has long been at work to complete its transition to proof of stake. A consensus-driven protocol that essentially manages the inner operations of the Ethereum network but uses far less energy than Bitcoin’s (and many other cryptos’) proof-of-work alternative, the evolution may drive ETH to a higher valuation than BTC.
It would be astoundingly remarkable considering that many early investors of cryptos likely bought tons of ETH coins, particularly as Bitcoin became a regular at the four-digit-price territory. ETH advocates anticipate that this day could come sooner than you might think. Thus, its recent reclamation of the $3,000 mark could be just the beginning.
Being a stablecoin — or a class of cryptos that are pegged to a fiat currency, typically the U.S. dollar — Tether (USDT-USD) offers advantages that many other digital assets don’t; namely, wealth security. While most cryptos tend to gyrate based on free market conditions, Tether allows investors to lock in their profits, while staying in the decentralized ecosystem, affording funds on demand to advantage immediate opportunities.
But the issue with Tether is that its advantages are not necessarily unique to USDT. As the news stream has demonstrated, many other stablecoins are appearing over the horizon, threatening to steal away market share from Tether, which has at time of writing become the third most valuable digital asset.
So, are USDT’s days numbered? While rising competitive risks draw concerns, I’m not losing much sleep over it. If anything, the biggest risk to Tether is whether or not its distributions are backed by physical cash reserves. In terms of increased rivals, Tether maintains such a vast footprint that it will be difficult for a challenger to unseat it.
One of the more recent blockchain projects designed to deliver greater utility and convenience to decentralized applications, Solana (SOL-USD) is a member of potential Ethereum killers. Although ETH represents the backbone of blockchain applications, the network has become incredibly expensive and cumbersome. Solana is a promising alternative, featuring speed, scalability and security, all while providing ultra-low transaction costs.
Recently, the upstart network received a massive boost of confidence when crypto capital markets platform Maple Finance expanded support to the SOL blockchain, per Cointelegraph.com. The article stated that Maple “deployed a $45 million fund to spur ecosystem growth.” Launched to bring greater utility and engagement for decentralized economic systems, Maple’s partnership with Solana could make SOL a worthy long-term investment.
At time of writing, SOL has retaken the $100 level after giving stakeholders a scare this past weekend. It’s also moving up the ranks in terms of market capitalization, making SOL one of the more intriguing cryptos to watch this week.
As cryptos become a force in mainstream finance, participants gradually want diverse options in their portfolios. While speculative activities have formed the backbone of the first iteration of the digital asset market, decentralized wealth preservation will eventually see increased demand. That’s where Terra (LUNA-USD) comes in.
A protocol that uses fiat-pegged stablecoins to power price-stable global payments systems, Terra represents the next evolution of blockchain-based commercial enterprises. Simply put, cryptos may branch out into separate categories; for instance, one for speculation, another for (relatively) reliable investments and yet another for payments. But a payments-driven asset needs to be stable, which is why LUNA is fundamentally attractive.
However, to draw mass interest, the project appears to be artificially inflating demand through a high-yield interest rate protocol that might not be sustainable. While I do appreciate the idea of a protocol geared toward making cryptos more practical for the everyday individual, there’s no such thing as a free lunch. Thus, people should watch this space carefully.
One of the earlier utilitarian cryptos, XRP (XRP-USD) — which was created by Ripple Labs — sought to leverage the power of the blockchain to spark ultra-fast (and ultra-cheap) payment transfers. Among the positive implications of such a project is the potential viability of international microtransactions. Some currencies are so weak that the cost of traditional transfers makes the process untenable. Ripple may have been on the way to change this narrative.
Unfortunately, the Securities and Exchange Commission got wind of Ripple’s involvement in the crypto space and eventually, Ripple found its way to court instead. The SEC accused the company of skirting securities law through XRP’s distribution, an action that Ripple vehemently denies. And throughout the ebb and flow of the legal proceedings, it appeared that Ripple was gaining the upper hand.
However, the latest news out of the courtroom indicates that due to the SEC’s extension request, the case might not be settled until 2023. It’s like a boxer being saved by the bell, which serves a key lesson for investors: don’t bet too heavily on legal dynamics.
It’s the news that everyone’s talking about, which also has downwind implications for cryptos, particularly Dogecoin (DOGE-USD). Famed entrepreneur Elon Musk shocked the world when news broke that social media firm Twitter (NYSE:TWTR) accepted his buyout offer, priced at $54.20 per share.
Obviously, the biggest concern from an ideological perspective is the ongoing free speech and censorship debate. Musk views himself as a free speech absolutist, which may be a problematic definition for many users because few things in society are truly absolute. For instance, you can’t disseminate prurient content to kids for obvious reasons. But free speech absolutism does open the door to ghoulish or bad-faith interpretations.
But that’s a different topic for a different day. Regarding Dogecoin, Musk has been an almost-absolute supporter of the canine-inspired memecoin. Therefore, it raises the prospect that the new Twitter will be particularly friendly toward DOGE.
Maybe so, but you got to remember this: Musk broadcasted his support for Dogecoin on national television yet it ultimately didn’t do DOGE much good in the long run. So, don’t gamble too heavily on this development.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, XRP and DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.