- Bitcoin (BTC-USD): The ultimate benchmark among cryptos, BTC is worrying but also benefits from inflationary concerns.
- Ethereum (ETH-USD): Although ETH slipped below the $3,000 level recently, it’s not yet time to panic.
- Tether (USDT-USD): A fascinating crypto to watch, Tether’s dynamics suggests that cryptos are pricing in inflation risks.
- BNB (BNB-USD): One of the most successful cryptos among the majors, BNB is hurting but not to the point of rushing for the exits.
- XRP (XRP-USD): Speculators might benefit from XRP since the coin ultimately ties in with the lawsuit, not the current volatility.
- Cardano (ADA-USD): ADA is one to watch carefully as it again lost its grip on the critical $1 level.
- Dogecoin (DOGE-USD): The lovable meme coin is still chugging along but it needs to start demonstrating true bullishness.
After a rough start to the new year, which saw geopolitical turmoil threaten to impose severe instability, the cryptocurrency sector began a much-needed rally from around the middle of March. Unfortunately, sentiment has waned in recent days with the April 11 session being particularly cruel. Now, several cryptos are sitting atop or just below critical technical thresholds, begging the question, what’s next?
In the near term, the virtual currency market could suffer additional volatility. According to a CNBC report, cryptos are tumbling as investors digest global macroeconomic headwinds. First on the list of flashpoints is the Russian invasion of Ukraine. Despite Russia’s “special military operation” likely to cut 45.1% of Ukraine’s GDP in 2022, the Kremlin appears completely unsatisfied. Thus, the prospect for more violence and instability appears very real.
Additionally, the coronavirus pandemic is beginning to rear its ugly head once again. Just as people thought that covid-19 was behind us — or no longer the scary monster we once thought it was — China adopted a binary all-or-nothing approach to addressing the SARS-CoV-2 virus. Most worryingly, government leaders have locked down the vital hub Shanghai, which presents problems for cryptos and the global economy.
To be fair, Reuters just reported that authorities are easing restrictions in some areas of Shanghai, which on the surface is good news. However, the weeks-long shutdown appears to have imposed sharp economic consequences, presenting concerns for cryptos. Above all, investors will need to be vigilant and maintain a cool head in the upcoming days and weeks.
Cryptos to Watch: Bitcoin (BTC)
As the benchmark of all cryptos, Bitcoin (BTC-USD) invariably leads the way, which of course is problematic when the trajectory is negative. If you’re a disciple of technical analysis, you won’t appreciate how BTC fell below its recently acquired support line of $40,000. Throughout the afternoon hours of the April 11 session, the leading digital asset by market capitalization is stubbornly trading at around the $39,700 level.
Reasons for the market downgrade are fairly obvious. With Russian President Vladimir Putin giving up on taking over the Ukrainian capital of Kyiv and instead shifting his forces to the east and south of the embattled nation, the violence will likely drag on. With peace talks stalling, further conflict seems inevitable.
In addition, if China’s severe crackdown on Covid-19 continues with its intensity, it’s possible — with China being the second-biggest economy — that the measures could induce a global recession. While that wouldn’t be helpful for Bitcoin, the expansion of the money stock remains a key factor for cryptos. Therefore, waiting for more news may be prudent.
As the second-biggest virtual currency by market cap, Ethereum (ETH-USD) will inherently track global market conditions, which explains its recent volatility. At time of writing, ETH is down 6% over the past five days, bringing its price a hair above the $3,000 level. For technical analysts, that’s not the development you would have hoped for, considering how important this level has been as a post-covid gauge of sector health.
Understandably, many stakeholders are concerned that broader macroeconomic headwinds could impose downwind volatility for cryptos. One standout concern is how Beijing is apparently willing to sacrifice vital economic performance to contain covid-19 outbreaks.
Still, if I take a look at the ETH price chart in context, the recent volatility — while sharp and painful — doesn’t yet seem to justify a panic. Still, a dip below $2,500 might warrant a rethink. Until then, investors may want to hold steady.
Cryptos to Watch: Tether (USDT)
Yet again, stablecoin Tether (USDT-USD) occupies the third-rank spot in terms of market cap, raising some eyebrows among observers. Just so everyone’s on the same page, stablecoins represent a special class of cryptos that are pegged to hard fiat currencies, typically the U.S. dollar.
The reasons for this are plentiful, though convenience ranks as a huge factor. Essentially, you can secure your “paper” profits in cryptos, thus never having to officially make the cumbersome transition between digital assets and fiat currencies. By doing this, users may also be able to defer tax implications, though readers must consult a tax professional certified for their jurisdiction for advice.
Anyways, what’s really fascinating about Tether is its market cap has trended almost on a one-year delay to the expansion of the M2 money stock. To me, this dynamic suggests that cryptos are finally pricing in the impact of monetary inflation. Therefore, I’m hesitant to bail out of the virtual currency sector — whether stablecoins or traditional coins and tokens — knowing that inflationary circumstances only seem to be worsening.
While Bitcoin draws most of the mainstream media’s attention, BNB (BNB-USD) is the real power player among cryptos ranked in the top five by market cap. As the world rang in the new year of 2021, BNB was trading hands at just below the $40 level. Fast forward a few months into early May and the coin was priced well over $600.
Historically, BNB was developed to raise funds for the underlying Binance exchange. Indeed, until a few weeks ago, the coin carried the name of the crypto platform before a brand transition occurred. Fundamentally, then, you can consider BNB a success, with Binance rising to become one of the most popular digital asset exchanges, in particular because it offers multiple cryptos to buy and trade.
True, the volatility for BNB is worrisome as the coin recently dipped below the $400 level. Still, it’s above the critical $340 to $350 long-term support line. Thus, you might not need to run for the big red sell button until then.
Cryptos to Watch: XRP (XRP)
If you’re a speculator — and since we’re talking about cryptos, it’s a reasonable assumption — then XRP (XRP-USD) might have gotten a bit more interesting because of the volatility in the blockchain space. To be sure, XRP is a victim like its peers, with the coin declining 6% over the past five days. Still, it could make for an interesting gamble if you have the nerve.
As I and many of my InvestorPlace colleagues have noted, the developers of XRP, Ripple Labs, is embroiled in a lawsuit that the Securities and Exchange Commission filed. The regulatory body alleges that Ripple skirted securities law through the issuance of XRP, while the defendants claim that XRP is a cryptocurrency and thus not falling under securities laws.
Increasingly, the rumor mill suggests that Ripple may actually have the more convincing argument. If so, it doesn’t really matter that XRP is struggling at the moment. Should Ripple win the lawsuit, XRP would have clear legal guidance. Of course, the company must come through, which remains an unknown.
Just as I was complimenting Cardano (ADA-USD) for rising above some awful technical doldrums, the ADA coin again slipped back below the $1 level. Psychologically, this is worrisome as according to a growing body of research, investors tend to have a bias toward clean round numbers. As well, in the discipline of technical analysis, support and resistance levels tend to cluster at round-numbered price points.
Given this tendency for investors to gravitate toward the psychological satisfaction of certain numerical thresholds, losing the $1 level for Cardano is significant. Now, I’m not going to rip into ADA considering that most other cryptos are flashing red. But the issue for ADA is that the pain seems to be particularly pronounced with the coin.
For ardent bulls, Cardano has little choice but to regain entry into the one-dollar menu. Frankly, sentiment was tenuous even with its recently disrupted rally. Thus, an extended return to the doldrums would probably not bode well for ADA.
Cryptos to Watch: Dogecoin (DOGE)
As the satirical digital asset that sparked the canine-inspired meme movement in the blockchain ecosystem, Dogecoin (DOGE-USD) enjoys significant relevance, perhaps to the chagrin of its many detractors. But in some ways, Dogecoin may be among the most honest of cryptos.
You don’t see DOGE advocates claiming that their blockchain network will solve world hunger or cure cancer. I’m not entirely sure if the community has an ethos other than to buy more DOGE and consume memes at a dizzying rate. It’s wild but I can also appreciate the transparency.
But is transparency alone enough to drive up the Dogecoin price? Unfortunately, present market dynamics have not spared DOGE. Still, considering that DOGE dipped to around 11 cents in mid-March, a 13.75-cent price point is not yet the signal to panic.
Still, you’ve got to figure that DOGE bulls need to start building momentum. Since peaking in May 2021, Dogecoin’s price trend has been negatively tilted. A substantive and sustained rally can change the narrative, but there’s no time for lollygagging.
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.