For those following the cryptocurrency complex, the latest macroeconomic news is exactly what embattled individual cryptos to watch needed to reverse sentiment. Specifically, the Personal Consumption Expenditures (PCE) index – the measure of inflation that the Federal Reserve favors – demonstrated a slowing pace of rising prices. Long story short, it could mean the central bank will less aggressively implement its monetary tightening program.
Further, it’s possible that as the Federal Reserve sees the labor market cool off, it might even gently introduce a dovish policy. One only needs to look at InvestorPlace’s corporate layoffs tracker to recognize that some accommodation may be needed down the line. It’s great that inflation is slowing but it can’t come at the cost of excessively high unemployment. Thus, some fundamental justification exists for bidding up some of the top cryptos to watch.
At the same time, if the best of the best enterprises anticipated only a short downswing, they probably wouldn’t cut their workers. After all, good help is hard to find these days. Therefore, investors still need to exercise caution when dealing with cryptos to watch. This deflationary cycle might only be beginning.
At the start of 2022, Bitcoin (BTC-USD) very roughly traded near the $50,000 level. Exactly one year later, BTC got off the starting gate of 2023 below $17,000. However, a resurgence of optimism that also positively affected the benchmark equities index bolstered sentiment in cryptos. At the end of the past weekend, BTC traded hands just under the 24K price point.
Per Cointelegraph.com, the fear and greed index for Bitcoin stood at 61 points on Sunday, implying greedy sentiment. It’s understandable considering that up to this point, Bitcoin clocked 11 consecutive days outside the index’s fear zone. As well, a majority of market participants believe that BTC will swing higher in the coming week.
That might be the case although here’s the deal with cryptos: anything and everything can happen. Right now, the good news is that Bitcoin stands well above its 50 and 200 day moving averages, $18,858 and $19,685, respectively. However, the bad news is that it will need to move to $30K soon to keep the bears at bay.
As with Bitcoin above, Ethereum (ETH-USD) caught a much-needed break this Jan. Going back to the start of 2022, ETH traded for roughly $3,800. At the start of this year, ETH sank to around $1,200. Fortunately, Ethereum rode the coattails of risk-on capital market sentiment. At the end of this past weekend, ETH traded hands for a little over $1,600.
Late Sunday evening, Ethereum’s fear and greed index stood at 64. Naturally, with the wave of bullish energy bolstering cryptos, investors are starting to dream again. Now, I don’t want to be a party pooper. But you must remember: that’s also when virtual currencies can lay a punishing blow on unsuspecting investors, particularly sector rookies.
For now, the good news is that Ethereum also trades well above its 50 DMA ($1,367) and 200 DMA ($1,431). However, the not-so-great news is that ETH bulls have some work ahead. At minimum, if this rally were to sustain itself, the price must reach $2,000. Really, prospective investors need to think about $2,500 to keep the bears away.
Should cryptos to watch continue to move higher, one of the digital assets that will almost surely gain demand is Tether (USDT-USD). A stablecoin, Tether itself doesn’t really gain or lose value – it’s pegged to the U.S. dollar. Still, with the implosion of previously vaunted stablecoins and related blockchain projects, investors need to be vigilant.
Please hear me out: I’m not saying that Tether will go to zero. At the same time, I’m also not saying that it won’t go to zero. Given that all cryptos to watch potentially could implode to utterly nothing – wasn’t that one of the lessons from FTX? – you want to be careful with exposure to USDT. My idea centers on having some funds in Tether if you’re a true believe in cryptos to watch. However, I would never put excessive capital at risk.
Basically, with the Fed still committed to tightening the monetary system, overexposure to USDT doesn’t make sense. After all, continued higher rates should raise the purchasing power of the greenback. And let’s face it: Tether has a greater chance of going to zero than Uncle Sam.
One of the more popular alternative cryptos (or altcoins), Cardano (ADA-USD) looked incredibly ugly last year. Recall that at the beginning of 2022, ADA traded hands for around $1.38. At the start of this year, Cardano found itself in literal penny stock territory. For one U.S. quarter, you could have bought one ADA coin. At the end of last weekend, the same unit will now cost approximately 39 cents.
Of course, that’s a massive boost of sentiment. Further, analytics tracking the sentiment on social media platforms indicates brewing optimism for Cardano since Jan. 21. Interestingly, even significant dips in the ADA price following the Jan. 21 session did not lead to sustained pessimism on social media. This could either spark a big rally in cryptos or lead to mass pessimism if a bearish wave cripples belief.
For now, the good news is that ADA well cleared its 50 DMA, which sits at 31 cents. However, the perplexing news is that Cardano trades hands right at its 200 DMA (39 cents). At bare minimum, ADA must clear this line. From there, it must reach 60 cents, which represents a tall order.
Although Solana (SOL-USD) really had nothing to do with the wild FTX bankruptcy, its disgraced founder’s support for SOL significantly hurt sentiment late last year. Notably, at the start of 2022, SOL traded hands for over $170 a pop. Exactly one year later, the coin was struggling at the $10 level. However, it enjoyed a massive burst of bullishness to spare its blushes. Late night Sunday, the market priced SOL at a little over $25.
Interestingly, despite Solana’s intense move higher, its fear and greed index contrasts with other cryptos. At this moment, SOL’s index reads 28%, which indicates pessimistic sentiment. One issue could center on how SOL reacted against its key moving averages. For instance, while Solana currently trades well above its 50 DMA, it stands right on its 200 DMA.
Based on the principles of technical analysis, bulls will need to see SOL swing decisively above this benchmark. Having done that, its next logical upside target centers on approximately $32. And from there, it would need to start making progress toward $60. However, it’s a tall order so investors should be careful.
Once vaunted as an Ethereum killer, many blockchain experts identified Polkadot (DOT-USD) to revolutionize the industry. To be fair, it generated a stratospheric rise for early believers. Initially trading hands at a bit over $4, at its peak in Nov. 2021, DOT breached the $50 ceiling. Unfortunately, that signaled the beginning of the end (at least for now).
At the tail end of last year, DOT went full circle, with the market pricing the coin at over $4. However, the broader resurgence in cryptos and risk-on assets pushed Polkadot to around $6.50 at the end of the weekend. It’s a major win, to be sure. Still, significant challenges remain.
Similar to other alternative cryptos, Polkadot managed to swing decisively above its 50 DMA. However, at the moment, it’s sitting on its 200 DMA. Again, to avoid attracting the bears, DOT will need to move higher and quickly. Its next logical upside target stands at $7.50. However, that’s bare minimum stuff as DOT needs to regain $10 to sustain bullish momentum.
One of a number of advanced blockchain networks, Cosmos (ATOM-USD) seeks to address some of the “hardest problems” facing the underlying decentralized ecosystem. Essentially, Cosmos claims to offer the antidote to relatively slow and expensive platforms utilizing the proof-of-work consensus mechanism. In its place, Cosmos offers an ecosystem of connected blockchains.
Back in 2021, retail investors ate up this narrative like hotcakes. Initially trading hands for under $4, at its peak, ATOM stood on the cusp of $45. Unfortunately, as with other cryptos, the year 2022 imposed sharp headwinds on Cosmos. By the second half of June last year, ATOM fell to a price of a little over $6.
To be fair, Cosmos got off to a very auspicious start in the new year. By the end of the weekend, ATOM reached a much-deserved price tag of $13.50 per coin. However, given the extreme volatility/choppiness of ATOM, its next logical target likely stands around $25. Again, it’s a tall order so caution is warranted.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT and ADA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.