- Truth be told, cryptos have failed so far this year as a digital safe-haven asset class but their evolution could deliver long-term profitability for patient investors.
- Bitcoin (BTC): The benchmark of all cryptos is likely to suffer losses in the near term as the weak hands panic out — though, investors will eventually have a once-in-a-blue-moon discount.
- Ethereum (ETH): The application backbone of cryptos also succumbed to market pressure, with the $2,000 level likely to become a critical battleground.
- Tether (USDT): Though Tether has held up because of its role as a stablecoin, too much volatility could pose severe challenges for this asset class.
- XRP (XRP): Although XRP has suffered a series of disappointments, the other cryptos may suffer more pain down the line since the lawsuit front-ended the damage.
- Litecoin (LTC): A combination of a highly anticipated upgrade and its under-the-radar profile might make Litecoin intriguing compared to other cryptos.
- Chainlink (LINK): Once one of the most talked-about altcoins, Chainlink is now trading at single-digit prices, presenting an enticing buy-the-dip opportunity.
- Monero (XMR): Call me cynical but the brutal taxation season for many crypto investors may draw attention to secure and anonymous Monero.
Although ardent blockchain proponents have long argued that some cryptocurrencies — especially after having achieved substantial mainstream visibility last year — will eventually become safe-haven assets, we must accept certain realities: this transition has yet to happen consistently and satisfactorily. Indeed, the latest fallout in cryptos suggests that they’re very much aligned with the dynamics involved in the global equities sector.
As you’re well aware, that’s a problem because stocks have also flashed red. Last week’s trading sessions were just brutal heading into the weekend. And until now, this week didn’t provide much of a boost either.
Based on data from Coinmarketcap.com, this unfortunate tally appears to be a fresh low for the year so far. Still, the one positive takeaway is that during the implosion of the digital assets sector last July, total market cap slipped to $1.2 trillion. Now, the global crypto market cap is at $1.32 trillion.
Still, for the bold contrarian, the volatility may present long-term upside opportunities. And considering that the cat’s out of the bag in terms of decentralized financial applications, certain assets are now listed at intriguing discounts. So, with that in mind, here then are the cryptos to watch.
Cryptos on Red Alert: Bitcoin (BTC)
As the benchmark of all cryptos, most blockchain proponents had high hopes for Bitcoin (BTC-USD) separating its correlation with mainstream investment classes like the stock market. Alas, that was not to be. While the equities sector suffered severe, confidence-shattering losses, Bitcoin did the same. You might even say it did worse.
For several months, BTC’s $40,000 level represented stable support. Not now. Currently, Bitcoin is trading just a few bucks above the $30,500 level. Any further damage and sustained trips below 30K is incredibly problematic for BTC. Unfortunately, such a circumstance isn’t out of the question since trading apparently reflects a broader risk-off sentiment.
To be fair, I don’t want to dismiss Bitcoin’s bounce-back capabilities. Back in July 2021, cryptos appeared headed for the abyss until they staged a surging comeback. This time around, though, you’ll want to be patient as retail investment support may be tapped out due to cash inflows to speculative arenas like non-fungible tokens (NFTs).
The same forward-looking idea for Bitcoin also applies to Ethereum (ETH-USD): exercise patience since the big discount could be coming our way. With BTC recently printing gobs of red ink, alternative cryptos (or altcoins) didn’t fare much better. In fact, over the past 7 days, Ethereum has shed more than 22%.
Again, a correlation with the equities sector is proving to be harmful for cryptos like Ethereum. Per Michael Kamerman, CEO of trading platform Skilling, “Cryptocurrencies are increasingly moving in sync with tech stocks with investors treating both as risk assets and often retreating to safer corners of the market during bouts of market volatility.”
Moving forward, the $2,000 level will likely be a massive battleground between bulls and bears. In July 2021, ETH dipped below $1,800 before skyrocketing to all-time highs. However, there’s zero guarantees that the same circumstance will materialize again. Thus, investors should wait for more confirming details prior to a big expenditure.
Cryptos on Red Alert: Tether (USDT)
One of the cryptos that didn’t suffer losses was Tether (USDT-USD). Of course, as a stablecoin — or digital asset pegged to a hard fiat currency like the U.S. dollar — Tether shouldn’t decline in price; otherwise, such an incident would cause mass pandemonium as USDT undergirds the virtual currency ecosystem.
Because of its pegged nature, Tether will likely attract attention among investors new to cryptos for its inherent utility. Arguably, most people use USDT to secure their “paper” gains in virtual currency trading while staying within the blockchain. That way, if another opportunity comes up, investors can react immediately as opposed to waiting for the cumbersome fiat-to-crypto conversion.
That said, Tether could end up being the canary in the coal mine. If too much volatility occurs in the crypto realm, it’s possible that investors will seek redemption of their USDT units to actual dollars. It then brings up the natural question: does Tether have the paper to back up its valuation?
We may eventually find out.
Long a controversial digital asset as it couldn’t be publicly mined like most other cryptos, XRP (XRP-USD) nevertheless gained a strong following. Eventually, it became the rallying cry among virtual currency proponents when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against XRP’s founding organization Ripple Labs.
At the crux of the legal debate was whether or not Ripple cynically issued XRP as a means to sidestep securities regulations. Of course, Ripple was gaining significant momentum in the courtroom until news broke that the case might not be settled until 2023. Presumably, this gives the SEC more time to attack Ripple’s defense.
Then came the sector volatility that devastated cryptos — and XRP received no exemption. However, it’s possible that XRP could pare losses better than competing digital assets since it front-ended much of its volatility because of the lawsuit. Logically, then, there might not be enough volume to panic out from.
Cryptos on Red Alert: Litecoin (LTC)
The original altcoin, Litecoin (LTC-USD) has since given up much of its market valuation and overall visibility in recent years. However, it maintains a strong following thanks to its rapid-fire speed (relative to Bitcoin transactions) and acceptability among merchants which are attuned to the crypto story. Better yet, Litecoin will receive a much-anticipated upgrade.
Called MimbleWimble, it aims to “improve the user experience by giving Litecoin Network users the ability to conduct private transactions.” As you may be aware, privacy and anonymity have always been important concepts in the blockchain space. However, because of the military crisis caused by Russia’s invasion of Ukraine, the ability to conduct transactions outside prying eyes has gained relevance for both legitimate and cynical reasons.
Furthermore, during this fallout impacting all cryptos, Litecoin’s status as an under-the-radar play might appeal to speculators who are looking for relatively stable names. Though the entire sector is wild, Litecoin hasn’t attracted as much attention; theoretically, then, there’s not as much room for LTC to fall.
As someone who has covered and participated in the blockchain journey, I feel the pain when it comes to the devastation in cryptos. Therefore, I’m not trying to be toxically positive: I recognize that many folks’ hopes and dreams are on the line. Nevertheless, if there is one positive to be gained, it’s that fundamentally compelling assets like Chainlink (LINK-USD) are now trading at attractive rates.
During the rally of 2021, Chainlink was trading near $50 at its peak. Proponents were enthused at the underlying utility of the network, which essentially connects off-chain information to power the increasing complexities of smart contracts. For instance, with LINK, it’s possible to align the execution of a decentralized smart contract with events that occur outside the blockchain (i.e. commodity prices, weather fluctuations, etc.).
Now, LINK is trading for just under $7.50, which is a steal compared to its zenith. Naturally, you don’t want to dive in full bore as it could yet fall further. However, the underlying utility makes it a name to put on your radar.
Cryptos on Red Alert: Monero (XMR)
Although cryptos have a reputation for being private and anonymous, that’s not necessarily the case. As the Colonial Pipeline cyberattack and subsequent recovery of the Bitcoin ransom proved, the federal government and similar powerful agencies have mechanisms to track down virtual currency payments. But good luck trying that with Monero (XMR-USD).
When people think about the stereotypical image of cryptos being mediums of nefarious activities, they’re usually thinking about Monero — whether they know it or not. Billed as an ultra-secure and ultra-anonymous blockchain network, many have tried to crack the Monero code. To my knowledge, all have failed thus far.
Moving forward, security and anonymity will likely be major issues. It’s not just about hiding money from government authorities to avoid sanctions. Rather, American investors that profited from cryptos in 2021 now had to pay taxes in 2022. And depending on what state you live in, the tax burden can be severe.
Stated bluntly, the onerous bill may cause some folks to become tax cheats. In such a situation, you can expect Monero to rise in volume.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, XRP, LTC and LINK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.