With the cryptocurrency complex barely holding onto its critical $1 trillion market cap, significant questions surround the potential trajectory of individual cryptos to watch. Recently, outspoken author Robert Kiyosaki warned about a potential crash, which will include gold, silver, and everyone’s favorite blockchain asset. However, Kiyosaki also stated that he will buy these assets on the cheap with so-called fake money.
I suppose that’s one way of looking at the sudden turn to the negative regarding cryptos. While it’s impossible to say with absolute certainty where the digital asset market will head next, all eyes will first focus on the critical CPI report. Depending on its implications regarding inflation, it could relatively loosen or tighten monetary policy. And the Federal Reserve of course carries significant clout regarding risk-on assets.
Even if the CPI report turns positive, investors need to remain vigilant. Just keep in mind that the real M2 money stock level remains incredibly elevated from pre-pandemic norms. Therefore, it’s not a time to make too many rash decisions. Below are the cryptos to watch this week.
Cryptos to Watch: Bitcoin (BTC-USD)
With the benchmark of all cryptos to watch, Bitcoin’s (BTC-USD) death cross is a key concern. Typically, a death cross materializes when a shorter-term moving average (typically the 50-day moving average) slips beneath a longer-term running average (usually the 200 DMA). If you go to Stockcharts.com and pull up the BTC chart – $BTCUSD – and select the weekly period, you’ll see it.
Again, before suffering a deluge of emails, I’m referring to the weekly period, not the daily. Under this framework, the shorter-term average did indeed slip below the longer-term average but barely. Apparently, investors stand at a crossroads, waiting for the CPI data to provide further clarity. From my vantage point, the setup seems risky for Bitcoin and other cryptos. Even if the CPI data turns out favorably for risk-on assets, the Fed will surely analyze other data points. As well, the market will look to future CPI and inflation-related reports to confirm prior assessments.
Also, keep in mind that China’s economic reopening could spark energy consumption, boosting demand and thus inflation. Therefore, the Fed still has arguably more reasons to stay hawkish than go dovish.
Cryptos to Watch: Ethereum (ETH-USD)
At the moment, Ethereum (ETH-USD) hasn’t yet printed a death cross on its weekly chart. However, it’s getting mighty close. Currently, ETH’s 50-week monthly average stands at $1,732.30. On the other end, Ethereum’s 200 WMA sits just under $1,500. Separated by only 15.5% at the time of writing, that’s a nothing-burger in the world of cryptos.
As with Bitcoin, it’s intriguing that Ethereum’s convergence of its two main moving averages occurred on the eve of a critical economic report. These are nervous times because, on a weekly (and logarithmic) basis, you can see that Ethereum really hasn’t progressed much. In order to have confidence in a recovery rally, ETH should trade around $2,500. That’s roughly 67% up from where I’m standing.
Of course, it’s possible that if the CPI print turns favorably for risk-on assets, Ethereum could fly. Certainly, Monday’s stock market performance suggests brewing optimism. Nevertheless, China’s reopening could throw a monkey wrench into this narrative so it’s worth being vigilant here.
Cryptos to Watch: Tether (USDT-USD)
Although stablecoins like Tether (USDT-USD) don’t offer capital gains potential – outside of advanced arbitrage trades – they do provide some insights into trading behaviors. Interestingly, the price of Tether exceeded its one-to-one ratio with the U.S. dollar, to which it’s pegged on Feb. 13. At its highest point, USDT reached $1.0023.
By itself, such a small magnitude move isn’t significant. However, that it materialized ahead of the CPI report warrants a closer look. During the trailing seven days, Tether didn’t budge higher than $1.0004.
Recall that during Russia’s invasion of Ukraine, cryptos spiked higher based on underlying demand from the two national currencies. As well, during this period, Tether jumped to a yearly high. Therefore, it’s possible that investors may be sensing a favorable CPI report indicating declining inflation. If so, the Fed may consider a more dovish approach, which over the long run suggests currency devaluation.
Still, going into cryptos during February and March of 2022 wasn’t the ideal move. Back then, the sector market cap fluctuated from $1.55 trillion to $2.16 trillion. Put another way, retail investors can sometimes get things wrong.
Perhaps the one virtual currency that garners more headlines than Bitcoin and Ethereum is XRP (XRP-USD). A creation of Ripple Labs, its founders designed XRP as a micropayment platform. However, Ripple caught the ire of the U.S. Securities and Exchange Commission for allegedly sidestepping securities laws. Now, the matter may be drawing to a close. And prominent legal experts weighed in, suggesting a possible positive outcome for XRP.
Maybe circumstances will indeed turn out that way. For now, however, XRP generates a worrying spotlight because it also printed a death cross on its chart. Again, on a weekly period, the 50 WMA (45 cents) slipped beneath the 200 WMA (49 cents). At the time of writing, XRP trades hands at around 37 cents a pop.
To be fair, since around June 2022, not only did XRP stabilize, it generally printed a series of rising lows. Of course, that’s a positive development. Unfortunately, if the latest CPI report turns negative for cryptos, XRP could suffer, irrespective of legal wranglings. Also, even if inflation data turns out positive, XRP investors must still monitor macro developments like China’s reopening. Unfortunately, it’s a risky proposition at the moment.
One of the more popular alternative cryptos, Cardano (ADA-USD) enjoys significant street cred. Essentially, it pioneered the proof-of-stake protocol that’s become so mainstream these days. Unfortunately, this narrative alone didn’t spare ADA from volatility. Indeed, it represents one of the most volatile digital assets among the majors.
Not shockingly, Cardano posted a death cross on its weekly chart early this year. Presently, its 50 WMA sits at 51 cents while its 200 WMA stands near the 61-cent level. At the time of writing, ADA trades hands at just under 36 cents. Notoriously, Cardano printed a death cross on its daily chart, which occurred in December 2021. Since then, ADA has been locked in a frustratingly bearish trend channel.
Moving forward, the coin has a long way to go before establishing credibility. At a minimum, ADA must secure the $1 level. If not, circumstances could remain ugly for the digital asset.
Earlier celebrated as a potential Ethereum killer, Solana (SOL-USD) incurred a yo-yo effect throughout the post-pandemic bull market. Initially, SOL received significant enthusiasm for its network’s speed, scalability, security, and low transaction fees. However, because disgraced FTX founder Sam Bankman-Fried sang its praises, SOL fell due to guilt by association.
Now, the good news for Solana is that since the start of the year, the underlying enjoyed a substantial rally. True, SOL as with other cryptos gave up some sizable market value over the past week. Nevertheless, on a year-to-date basis, SOL returned more than double for its stakeholders.
Unfortunately, not everything about digital assets rings so positively. Against a weekly period, Solana’s technical chart doesn’t look inviting. As data from Stockcharts.com reveals, the baseline horizontal support stands at around $32. From where I’m watching, SOL would need to move up approximately 50% to reach this critical point. With multiple economic reports on the way, investors will want to exercise caution with SOL and other cryptos.
Another top-performing entity among alternative cryptos, Avalanche (AVAX-USD) gained approximately 60% of market value since the January opener. Billed as a platform for decentralized applications and custom blockchain networks, Avalanche commands substantial relevancies. It’s also one of the potential Ethereum killers, with developers seeking to unseat the ETH network as the most popular blockchain for smart contracts.
However, relevancy doesn’t save underlying cryptos from volatility, unfortunately. In Avalanche’s case, the associated coin lost about 79% of its market value in the trailing year. With the deflationary forces inherent in the Fed’s rate hike campaign, AVAX and other risk-on assets stumbled in 2022. Although circumstances look auspicious in the new year, prospective investors need to be careful.
Looking at AVAX on a weekly chart, the price action overall ebbs and flows wildly. It’s possible that a horizontal support line exists at $20. If so, AVAX isn’t too far off from the mark. However, if upcoming economic reports don’t favor cryptos, Avalanche may unfortunately live up to its name.
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.