Although groundbreaking innovations focused on decentralized global transactions under the cryptocurrency sector, it’s really the Federal Reserve that has had the most to say about cryptos this year. With the central bank committed to a hawkish monetary policy, the resultant tightening of the money supply hurt risk-on assets. Frankly, few other trading categories are as risk on as virtual currencies.
That said, rumors started flying recently that the Fed will start easing up on its hawkish pivot. For one thing, certain economic figures suggest stalling demand, according to a Reuters report. And that has raised concerns about the central bank becoming too aggressive with its benchmark interest rate hikes. After all, move the needle too much and the ecosystem could incur deflationary dynamics.
While many focus on the various policy fluctuations’ implications on cryptos, it also raises a disheartening concept. Despite best efforts, virtual currencies remain tethered to fiat-based institutions, whether that’s the Fed or the global equities sector.
Given that investors must approach any market with realistic expectations, participants must still engage the below cryptos with caution.
The king of all cryptos, Bitcoin (BTC-USD) sported a market capitalization of just over $395 billion in the wee hours of Nov. 1, 2022. Over the trailing seven days, BTC gained almost 7% of market value. Since the start of the year, however, Bitcoin slipped nearly 57%, reflecting steep challenges ahead.
Technically, the next logical target for the bulls is $25,000, then onto $30,000. However, the last time BTC spent any time decisively above 25K was in June of this year. Therefore, questions remain about how long the asset can continue meandering about aimlessly. On the bearish side, further trips below 20K pose significant concerns, likely shaking out several stakeholders.
To be fair, some analysts don’t consider sideways trading to be negative for BTC and other cryptos. They point to smart money accumulating digital assets. At the same time, the money stock generally rose during the lifecycle of Bitcoin. Should the Fed send this trajectory the other way, the outcome for BTC is questionable.
As I said earlier, caution rules the day.
The ever-present number two among cryptos, Ethereum (ETH-USD) currently commands a market cap of just under $19 billion. Over the trailing seven days, ETH gained a very respectable 18% of market value. In the past 24 hours, the coin traded slightly above parity. And since the beginning of this year, ETH dropped 58%, again reflecting steep challenges for digital assets overall.
Technically, the obvious logical target centers on the $2,000 threshold. The last time ETH popped at, or near that, was in August. However, you’d have to go back to May regarding the last time Ethereum spent time decisively at or above 2K. From there, the next target would be 3K. Unfortunately, the bears have been successfully suppressing the price below the psychologically important 2K level.
Moving forward, investors anticipate that the Fed will ease up on its monetary tightening. If so, that could give risk-on assets like ETH and other cryptos some breathing room to run. However, I would still say that the gargantuan money stock represents a far bigger negative catalyst. Thus, I would still be cautious with Ethereum.
A stablecoin or digital asset pegged to a fiat currency (usually the dollar), Tether (USDT-USD) currently sports a market cap of $68 billion. As of the moment, USDT is the third-biggest digital asset by market value. Over the last seven days, USDT only dipped 0.02%, which is rather normal for a stablecoin.
Still, the matter raises some concerns. For instance, in the trailing month, USDT finds itself down 0.03%. By itself, it’s a nothing burger. However, the purchasing power of the dollar largely stabilized since June 2022. In other words, thanks to the Fed’s hawkish policies, the central bank arrested the currency erosion of the greenback. Over time, it’s possible for fiat currencies to rise in value.
If so, what would the point be about owning excessive units of Tether? Stated differently, if the real deal provides wealth expansion, why go with an unproven (unaudited) digital alternative?
During bullish cycles for cryptos, heavy exposure to USDT might make sense. But in a slowdown, investors may want to rethink this risk coverage.
One of the so-called Ethereum killers, Solana (SOL-USD), after posting some disappointing performances this year, came back swinging. In the past week, SOL gained a hearty 16% of market value. However, sentiment did slip in the trailing 24 hours, declining by 1%. Overall, SOL fell roughly 80.5%, a staggering loss even compared to other wild cryptos. Presently, Solana features a market cap of $11.9 billion.
Technically, SOL bulls will need to regain control of the $50 level. Though the coin experiences the occasional spike higher, the last time Solana decisively owned this threshold was in May. Beyond that, market proponents must start a credible pathway toward reclaiming the $100 level. That might be a tall order given the broader economic and monetary ecosystem. For sure, the bears may be targeting the $20 level, representing great risk if SOL can’t keep moving higher.
Although Solana initially skyrocketed on its blockchain-disrupting ambitions, it’s all about surviving current deflationary pressures. If the Fed does not cooperate with some easing, stakeholders will need to be vigilant.
If you had to summarize the past week for cryptos, it could be the rise of the meme coin. For instance, the lovable Dogecoin (DOGE-USD) gained an astonishing 144% of market value during the past week. Sentiment refuses to dry up, with DOGE adding nearly 27% to its pricing war chest in the trailing 24 hours. Presently, DOGE commands a market cap of just over $7 billion, making it the eighth-most valuable digital asset.
Technically, DOGE did itself plenty of good. Before the wildness erupted, DOGE trended around the six-cent line. It really needed to take out the psychological barrier of 10 cents. It did that and more, with the coin priced at just under 15 cents at the time of writing. Moving forward, the next logical target is 20 cents. Of course, stakeholders must be aware of severe downside volatility risks as well.
Fundamentally, Dogecoin benefitted from Elon Musk’s takeover of social media platform Twitter. Given the tech entrepreneur’s love of all things DOGE, the underlying ecosystem received a massive shot in the arm.
Shiba Inu (SHIB-USD)
Never too far behind the enthusiasm for speculative cryptos, Shiba Inu (SHIB-USD) essentially rode Dogecoin’s coattails. Over the trailing seven days, SHIB gained a robust 31% of market value. As with its partner in crime, optimism remains strong. In the past 24 hours, SHIB returned over 9% of its value. Still, not all is well with the token, losing about 60.5% YTD. Currently, SHIB sports a market cap of $7.16 billion.
Technically, bulls need to aim for the 0.002 cent level, which will take a gargantuan effort. Basically, SHIB almost needs to double from where it is right now to achieve this threshold. Otherwise, you’re looking at adding another place to the right of the decimal point. It’s a volatile asset and only hardened speculators should participate.
Still, what’s intriguing about Shiba Inu is that because the community doesn’t take itself too seriously, the underlying ecosystem might be untethered from certain fiat-based market realities. That does offer some speculative opportunities. At the same time, the lack of predictability will keep conservative investors well on the sidelines.
Dogelon Mars (ELON-USD)
One of the emerging members of the meme coin pack, Dogelon Mars (ELON-USD) would normally not be worth consideration among cryptos. As with Shiba Inu, the lack of predictability poses severe challenges for most investors. However, credit must be given where it’s due. In the trailing week, ELON gained over 85% of its market value. And in the past 24 hours, it’s gained over 16%.
Technically, ELON meandered aimlessly before the Twitter takeover announcement. Thus, prior to the disclosure, bullish market participants targeted the 0.00004-cent level. Well, with the recent skyrocketing, ELON is well above this threshold. In order to make the positive return stick, though, it probably needs another 100% move. I’m not sure where you’re going to get that under the present monetary circumstances.
Still, the beauty of Dogelon Mars is the don’t-give-a-hoot attitude that undergirds meme coins. Again, ELON doesn’t seem tethered to fiat-based institutional realities. This dynamic both opens doors for speculative cryptos while also making them awfully dangerous. You’ve been warned.
On Low-Capitalization and Low-Volume Cryptocurrencies: InvestorPlace does not regularly publish commentary about cryptocurrencies that have a market capitalization less than $100 million or trade with volume less than $100,000 each day. That’s because these “penny cryptos” are frequently the playground for scam artists and market manipulators. When we do publish commentary on a low-volume crypto that may be affected by our commentary, we ask that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
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On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT and DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.