Given the penchant for cryptocurrency assets to bounce substantially higher from desperate lows — most notably and recently during the July 2021 shock bottom and subsequent recovery — it’s understandable that investors want to hold onto their digital assets. Frankly, keeping a core position may be wise as you don’t know what will happen next. Nevertheless, certain realities suggest you may want to take some — I repeat some — profits from cryptos off the table.
The first reality is the Federal Reserve. As I detailed recently, the world’s most powerful central bank appears committed to attacking the inflation problem. True, the Fed must delicately balance the modulation of the federal funds rate; otherwise, it could possibly capsize a shaky economic recovery. Still, with inflation hitting 9.1% in June, the Fed must respond fairly aggressively with higher interest rate hikes, which doesn’t bode well for cryptos.
The second reality is because of the tightening of monetary policy, the technology sector is receiving a disproportionate magnitude of the pain. In fact, tech layoffs have been accelerating this year, impacting high-profile names like PayPal (NASDAQ:PYPL) and Coinbase (NASDAQ:COIN), both of which are tied to cryptos to varying degrees.
In other words, it’s time to read between the lines. Now, let’s dive in and take a closer look at seven cryptos presenting big opportunities.
Cryptos: Bitcoin (BTC)
Recently, electric vehicle (EV) firm Tesla (NASDAQ:TSLA) made headlines — arguably for the wrong reasons — when it announced that it sold 75% of its Bitcoin (BTC-USD) holdings. Naturally, BTC slipped on the news, which was indicative of one of my core frustrations with cryptos. But, it’s worth repeating now.
You have no friends in the virtual currency space. While high-net-worth individuals may be egging you on to buy BTC or other cryptos, at some point, everyone is in it for the money. As soon as you recognize that your favorite gurus don’t give a toot about you, you’ll be able to objectively assess the digital asset market.
To me, I find it helpful to look at blockchain analytics provided by Coinpaprika.com, particularly for stakeholder profitability at a given price. Based on the time of writing rate of $21,104, 46% of stakeholders are in the money whereas 47% are out. Furthermore, 7% are neither profitable nor losing money.
Still, this balance is edging closer to the bearish spectrum, which means panic might ensure if BTC falls any further.
Like Bitcoin above, Ethereum (ETH-USD) has enjoyed conspicuously strong momentum following the mid-July session. For the past few days, ETH managed to trade around the $1,600 level, a refreshing change of pace from the prior trend line around $1,000. Still, with questions surrounding cryptos amid the Fed’s likely move to raise interest rates to attack inflation, ETH has weakened.
To be fair, cryptos could go either way after the Federal Reserve’s latest moves. But irrespective of the central bank’s decision, the economy remains troubled, with growth-exclusive enterprises laying off their employees. Therefore, I believe it’s still wise to be cautious about ETH.
Looking at Ethereum’s blockchain analytics, 51% of stakeholders are making money at the current price while 45% are losing, with 4% right in the middle. Though it’s a more favorable backdrop compared to Bitcoin, another major correction could spark a major shakeout.
Cryptos: Tether (USDT)
For the past several articles about cryptos, I’ve been sounding off on my concerns about Tether (USDT-USD). While I still maintain a small position in USDT — as I do with many of the cryptos on this list — increasingly, the risk of maintaining significant wealth in these digital assets was not worth the reward.
To be fair, Tether finally reached parity with the U.S. dollar on a true one-to-one basis. In fact, there have been a few sessions where USDT was slightly more valuable than the greenback. So, has my assessment on USDT and other stablecoins changed? In short, the answer is no.
As CNBC detailed in May of this year, the collapse of rival stablecoin TerraClassicUSD (USTC-USD) substantially impacted Tether, knocking it off its exact — or “better” — 1:1 ratio. Now that circumstances have relatively normalized, it appears confidence has returned to USDT.
However, who is to say that another crisis won’t materialize again in cryptos? With the Fed committed to doing whatever needs to be done to attack inflation, holding significant wealth in Tether seems risky.
In the interest of delivering information, The Daily HODL reported that the judge presiding over the Ripple Labs case is losing patience with the U.S. Securities and Exchange Commission (SEC). As you probably know, the SEC brought a lawsuit against Ripple, accusing the company of creating the XRP (XRP-USD) coin — which was originally designed to facilitate rapid-fire transactions — to skirt securities law.
According to the report, a legal expert believes that the SEC’s alleged flip-flopping regarding its side of the argument is testing the court’s patience. Therefore, the legal battle could still favor XRP. Over the last few weeks, it appeared that the regulatory agency was gaining ground.
Personally, I think investors are better served spending more of their time focusing on cryptos without legal headwinds. Unfortunately, these things can go either way.
On a purely technical level, the order book has tightened up between bulls and bears, with neither side appearing to give an inch. Interestingly, bids, or buy orders, outpaced asks, or sell orders, prominently during October and November of last year. Since then, however, the bears have been successful in dragging the XRP price down.
Cryptos: Cardano (ADA)
Since its market debut, Cardano (ADA-USD) has always intrigued hardcore followers of cryptos, first for its “cheap” price and second for pioneering the energy-efficient protocol of proof of stake. Naturally, as interest in virtual currencies rises, so too — generally speaking) — does the sector’s energy consumption. With Bitcoin imposing a wider energy footprint than Cardano, presumably, ADA is the better crypto for the environment.
However, I would encourage prospective crypto investors to consider the brass tacks of any coin or token rather than its energy consumption angle. Here’s the harsh reality: no matter what anybody says about the efficiencies of particular blockchain projects, the reality is that the world was doing just fine without cryptos. Fundamentally, they don’t really solve problems that centralized platforms can’t. Instead, they brought another vehicle of speculation to the table.
Therefore, when it comes to ADA or any other digital asset, it’s best to focus on hard data. In Cardano’s case, following a surge of bullishness in September 2021, the order book between bulls and bears has been tight. However, the results have largely favored the latter this year.
Shiba Inu (SHIB)
Though often dismissed as a joke — and quite frankly, it’s a terribly risky proposition — Shiba Inu (SHIB-USD) continues to impress onlookers with its relative performance. As of this writing, SHIB commands a market capitalization of $5.74 billion, putting it at number 16 against all other cryptos. By the way, there are currently 20,359 digital assets available for trading. Therefore, it’s an accomplishment no matter your feelings about meme coins.
Still, the heat is on for Shiba Inu. Back in early June of this year, the token’s order book showed a massive spike in sell orders, contributing to a conspicuous erosion in the SHIB price. True to form, bulls responded aggressively, buying the dips to use sector parlance. So far, the optimists have succeeded in driving up the SHIB price to the early June levels before the crash.
However, the most recent data shows another significant wave of selling — despite a period of buying on Wednesday afternoon. Nonetheless, if mainstream cryptos can’t keep it together, my main concern is that the pain will disproportionately affect these highly speculative assets. Therefore, stakeholders should be extremely vigilant.
Cryptos: Filecoin (FIL)
Looking toward the future, if I had to guess which might be the next big name in cryptos to flourish, I’d give the nod to Filecoin (FIL-USD). Essentially a decentralized cloud storage network, Filecoin is a truly practical and utilitarian blockchain project that, in my opinion, actually solves real-world problems. Essentially, the network invites both users and storage providers to participate, fulfilling each other’s needs under an economic ecosystem.
Think of a cloud computing service but where the people — not big corporations — are in charge. Users who need to upload data in the cloud can do so whereas everyday people who happen to have extra storage space can contribute it to the Filecoin network. In return, providers receive cryptos for their troubles.
Still, the one glaring challenge is that the underlying reward tokens must command some value. Right now, that value is $5.55 and has shrunk substantially from its high of nearly $200. Still, over the long run, if robust bullish sentiment returns again to cryptos, FIL should be a speculative name to consider.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, XRP and ADA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.