Counting down the final days of 2022, investors should be extremely careful in their approach to these top cryptos to watch. Technically speaking, the holiday season resulted in less participation. Therefore, trading volume declined in recent sessions, making virtual currencies susceptible to large moves via aberrant transactions. However, such dynamics can lead to both quick gains and losses, requiring tremendous vigilance.
Over the trailing week, cryptos haven’t moved much. In total, the market capitalization of the blockchain ecosystem measured around $809 billion. At the time of writing, this tally increased to approximately $813 billion, or roughly the equivalent of a half-percent move. Until participation improves significantly, investors may want to stay on the sidelines.
Fundamentally, arguably the biggest driver for cryptos is the real M2 money stock. A multi-year analysis demonstrates that the money supply and the benchmark virtual currency share a strong direct correlation. In other words, as the money supply increases, so too do cryptos because of the inflationary implications.
However, the opposite appears to be true as well: a shrinking money supply generally equates to lower valuations for cryptos. With the Federal Reserve committed to a hawkish monetary policy, investors must exercise caution regarding the below digital assets.
After a few signs of life earlier this month, Bitcoin (BTC-USD) again finds itself trading below the $17,000 threshold. This circumstance presents challenges for investor sentiment because BTC has been steadily losing ground regarding psychological thresholds.
At the beginning of this year, Bitcoin struggled to maintain control of the 50K threshold. By late April, it had lost the ability to hold steady at 40K. For a brief period in May, 30K acted as a critical support line, which then gave way to 20K. Failing to maintain that level, Bitcoin’s inability to return to 20K clashes with the permabull view. After all, 20K represented the peak of the last bull run (which culminated in late 2017). Continuing to trade below this point represents an eyesore, to say the least.
Unfortunately, broader fundamentals don’t seem very supportive of BTC and other cryptos. Again, with the Federal Reserve showing no signals of reversing its hawkish policies, Bitcoin may struggle during 2023’s early cycle. Bitcoin still remains one of the top cryptos to watch.
As with Bitcoin and other cryptos, investors must exercise caution regarding Ethereum (ETH-USD) in the waning days of 2022. Recently, Benzinga noted that large transactions – greater than $100,000 – reached a lull. While this decline centered on Bitcoin, the charts demonstrate that Ethereum has also incurred reduced volume. Therefore, investors need to be careful about committing too strongly to aberrant moves.
To be fair, analysts in the blockchain space noted that the U.S. dollar index appears poised for further weakness. Given the inverse relationship between the dollar index and risk-on assets (like cryptos), further greenback erosion could yield gains for digital assets. While I’m not going to dismiss this theory outright, market participants must be careful.
Throughout 2022, the Fed demonstrated zero qualms about raising the benchmark interest rate to combat inflation. And even when some evidence showed that inflation hit a peak, policymakers continued to tighten the money supply. So, even if the dollar weakens, the Fed could theoretically prop it back up rather easily. ETH is also another one of the top cryptos to watch heading into 2023.
One of the few cryptos to which I see very little point in heavy exposure is Tether (USDT-USD), which presents what I believe to be an unacceptable risk-reward profile. During a decisively bullish cycle, Tether and other stablecoins offer a significant convenience. Essentially, one doesn’t need to convert fiat currencies to crypto coins if they already have their trading funds in USDT.
Unfortunately, in a bearish cycle, long-side opportunities are few and far between. Combined with the non-zero possibility of Tether imploding like other stablecoins, the rewards are little to none. But the risks rank as catastrophic. While one can always complain about Federal Reserve Notes, at least they enjoy backing from the U.S. government.
Unless you believe in conspiracy theories, Uncle Sam will be around for a while. To be fair, investors can earn tremendous interest on their Tether units. However, with blockchain platforms coming under fire lately, even this route presents risks. Therefore, let the buyer beware. Still, keep an eye on Tether as a top crypto to watch in 2023.
Following the implosion of the FTX platform, rival Binance initially garnered relatively positive attention. As the financially sound enterprise of the two, Binance allegedly was in a position to bail out FTX. Of course, that didn’t happen. But for a while, Binance’s underlying crypto coin BNB (BNB-USD) bounced higher, in part because it wasn’t FTX.
Unfortunately for stakeholders, the enthusiasm toward BNB didn’t last that long. And in the trailing week, BNB represents the worst performer among cryptos trading in the top 10 by market cap. At the moment, the coin is down 2.2%. For those hoping for a contrarian opportunity, they may want to sit this one out for now. Compared to other cryptos, BNB’s technical profile continues to trend weakly. For instance, Bitcoin gradually traded higher since hitting a low point on Nov. 21. In contrast, BNB – after a brief jump higher – has been trading negatively.
Until fundamental circumstances improve for risk-on assets, it’s probably best to remain skeptical. Keep BNB on your list of top cryptos to watch in 2023.
From the worst performer in the trailing week to the best, XRP (XRP-USD) has taken stakeholders on a wild ride. At the time of writing, XRP gained about 6%, reflecting strong enthusiasm. Contrary to other cryptos, XRP does enjoy a significant fundamental catalyst to look forward to. Based on the latest legal rumblings, a decision could arrive soon regarding the Securities and Exchange Commission’s lawsuit against Ripple Labs, the originator of XRP.
To briefly summarize, the SEC charges that Ripple sold $1.3 billion worth of XRP as securities and not cryptos. Per the regulatory agency, the alleged-to-be-illicit sales occurred between 2013 and December 2020. For its part, Ripple denies wrongdoing, consistently stating that XRP is a virtual currency.
On paper, a favorable ruling for Ripple would give XRP legal precedent, a status cryptos lack. Prior to the FTX bankruptcy, that might have meant something. However, with public sentiment turning against blockchain assets, investors need to be careful with XRP, irrespective of any legal decisions. Still, keep it on your list of top cryptos to watch in 2023.
In the trailing week, Cardano (ADA-USD) gained more than 2%, thus representing one of the best-performing cryptos during the period. However, against a longer-term framework, ADA suffered one of the worst declines. At the beginning of the year, ADA units traded for roughly $1.31. At the time of writing, they trade for a little more than 26 cents a pop. That’s about an 80% decline.
From a technical perspective, what’s particularly problematic about Cardano is that it hasn’t traded above its 200-day moving average since November of last year. And throughout this year, ADA only occasionally popped up above its 50 DMA. For most of this year, ADA traded well below this nearer-term indicator of market health, posing concerns among prospective investors.
Yes, you can say that Cardano trades at a relative discount. However, with cryptos struggling for traction against the Fed’s hawkish policy, it’s best to stay skeptical. Sadly, ADA lacks a meaningful upside catalyst amid the central bank’s deflationary storm. Here, too, keep ADA on your list of top cryptos to watch.
Shiba Inu (SHIB-USD)
One of the more controversial cryptos, Shiba Inu (SHIB-USD) cuts a divisive profile. Some view it as nothing more than a passing fad. Others recognize the fundamental potential of decentralized communities and ecosystems beneath the oddball exterior. Still, let’s give credit where it’s due. Despite the troubles affecting virtual currencies, Shiba Inu still ranks as a top 15 virtual currency.
Unfortunately, that’s where most of the praise ends. On the surface, the lack of a pretentious directive – addressing global hunger, curing cancer, etc. – presented a refreshing take. Basically, people bought SHIB simply to have fun and to hopefully make a quick buck. No one had delusions of grandeur of replacing the dollar with dog memes.
At the same time, this renegade, don’t-give-an-[expletive] approach to cryptos failed to spare SHIB volatility. Since the start of the year, Shiba Inu lost roughly 75% of its market value. If anything, the downfall provides a sharp reminder: just because SHIB may seem like a joke doesn’t mean the subsequent losses are funny.
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.