Although the cryptocurrency market got off to a strong start in the new year, circumstances appear to be on the cusp of shifting unfavorably, implying investors should consider taking corrective measures for their cryptos to watch. At the very least, market participants must be cognizant of potential influencing factors.
Primarily, a stubbornly high inflation rate – courtesy of a higher-than-expected Personal Consumption Expenditures (PCE) index – implies that the Federal Reserve may have its work cut out for it. Given the central bank’s commitment to tackling inflation, policymakers may decide to go aggressive with their interest rate hikes. If so, that wouldn’t organically benefit cryptos to watch.
Secondly, government officials have started more chatter about regulations for virtual currencies. On paper, such a framework should be positive for cryptos as it implies standardization and therefore predictability. However, as with anything in life, greater predictability translates to less reward potential. With sentiment weakening for risk-on assets, investors should approach the blockchain arena cautiously. Below are seven cryptos to watch.
Heading into the beginning of the business week, Bitcoin (BTC-USD) managed to move up a modest 1.3% over the past 24 hours. However, in the trailing week, BTC gave up around 4% of its market value. On the eve of the Monday morning session, BTC stood around $23,500. To inject confidence in the space, the upcoming week may be critical.
On the positive end, BTC presently trades above its 50 and 200-day moving averages, which stand at $22,443 and $19,748, respectively. Moving forward, though, reclaiming the $25,000 price point will be crucial. From there, a long-term horizontal support line exists at $30,000.
Significantly, Bitcoin parked at 30K in early 2021 before bouncing sharply higher in the spring. Later, it parked there again before mounting a rally that reached a record valuation in November 2021. Therefore, reaching and securing 30K will be absolutely vital for Bitcoin and other cryptos to watch. Failing to do that, BTC’s 200 DMA may provide support. However, the bears would be hungry if Bitcoin were to drop that far.
Hours before the Monday morning session, Ethereum (ETH-USD) managed to gain a bit over 2% of market value. However, it too struggled in the trailing week, declining by around 3%. Perhaps more so than Bitcoin, Ethereum needs to start attracting near-term momentum.
At the time of writing, the current price of ETH (around $1,636) sits almost at parity with its 50 DMA. Thus, to keep the bears at bay and not get any funny ideas, ETH must push higher. At a minimum, of course, the second-in-command of all cryptos must secure the $1,700 level as a near-term target. From there, it’s going to be all about the psychologically and technically significant 2K level.
In early April of 2021, 2K imposed a resistance barrier to Ethereum before it quickly broke through. By May, ETH exchanged hands at over 4K. When cryptos suffered its mini-collapse in spring 2021, 2K then provided support before ETH shot up to record heights. Therefore, this price point carries historical significance. Failing that, investors need to pray that Ethereum’s 200 DMA (at around $1,439) holds. Otherwise, circumstances could get ugly.
As a stablecoin or a series of cryptos to watch pegged to a fiat currency (usually the U.S. dollar), Tether (USDT-USD) doesn’t feature major price swings, instead pipping higher or lower in micro-increments. During decisively bullish market cycles, exposure to Tether makes sense on many levels. By having wealth in USDT, investors can respond quickly to opportunities (rather than waiting for the fiat-to-crypto conversion process).
Still, with the drama associated with the FTX bankruptcy – along with many other blockchain-related projects imploding – Tether may lose much of its sheen. Again, tighter regulations mean standardization, which subsequently should force auditing of stablecoin networks. This way, investors can rest assured that their digital assets correspond one-to-one with the underlying paper.
Whether this is true or not, the market certainly believes this ratio stands as advertised. However, if any concerns materialize about this ratio or the ability to convert cryptos back to fiat, a digital bank run might materialize. I’m not saying dump all your Tethers as I personally too hold some units of USDT. However, it may be wise to trim excess exposure.
One of the slow performers of cryptos recently, Cardano (ADA-USD) ahead of the Monday morning session approached gaining only about half a percent above parity. Unfortunately, in the trailing one-week period, ADA gave up approximately 10% of market value. While blockchain assets are notorious for their volatility, Cardano is really taking the cake. Therefore, it needs to start moving higher quickly before attracting the bears.
At the moment, Cardano sits in an unenviable position whereby its price point and its 50 and 200 DMAs converged. Technically, this framework suggests that the bears have started to gain some control over the market. Confirming evidence comes in the form of declining volume trends. In this tug-of-war, it’s crucial for the bulls to start helping the cause.
Near term, Cardano must get to the first layer of horizontal support, which stands at around 45 cents. From there, it’s a long way up to the critical support line of $1. This is where some impressive battles took place, thereby carrying much historical significance. Should Cardano fail to move higher from its present juncture, it could be an ugly fall down due to the aforementioned convergence.
Another badly bruised example among cryptos to watch, Solana (SOL-USD) approached the final business week of Feb. gaining over 1% in the past 24 hours. However, in the trailing week, SOL gave up nearly 14% of its market value. Adding to its woes, Solana features one of the strangest chart patterns. Therefore, it needs a big break more so than other digital assets.
As with Cardano above, Solana suffers from a convergence problem with its present price and its 50 and 200 DMAs rapidly approaching the same intersection. Also similar to ADA, Solana suffers from generally declining volume since mid-January. With participation fading, circumstances don’t appear auspicious for the cryptos once labeled as Ethereum killers.
Moving forward, Solana must hit and rise above the $30 level – that’s the bare minimum. From there, it needs to secure $40 as a baseline to attack $100. Unfortunately, that’s a major ask, particularly with the Fed likely to raise rates more aggressively. The thing is, if SOL fails to make progress quickly, it could fall sharply to around the $14 level. Thus, Solana presents an unusually risky profile.
Not everyone was meeting the new week with sour faces. In particular, Ankr (ANKR-USD) stood out as the top performer on a trailing-week basis heading into the Monday morning session. During the aforementioned time period, ANKR skyrocketed by 32%. And believe it or not, the blockchain asset shows some promise.
At the time of writing, ANKR traded hands for around 4.4 cents. In contrast, its 50 DMA pinged at 2.9 cents while its 200 DMA sat at 2.8 cents. Unlike many other cryptos, the broader rise of Ankr in the new year aligned with sharply lifting volume trends. Put another way, volume confirmed the price, which is what you want to see.
Now, the big challenge looking forward is the 7-cent level. After initially acting as a resistance barrier in the first quarter of 2021, it later acted as horizontal support. This line held faithfully until cryptos collapsed in the first half of 2022, a victim of the Fed’s hawkish policies. Should ANKR not make progress from the current vantage point, it may fall back to 3 cents. So far, though, Ankr represents one of the most confident-looking cryptos to watch.
An intriguing blockchain project, Optimism (OP-USD) is one of the few cryptos that printed green ink recently. Heading into the Monday morning session, OP gained 4% in the past 24 hours. And over the trailing week, it jumped up about 12%. For prospective investors, the case for Optimism is two-fold.
First, OP enjoys incredible momentum. At the start of the new year, OP traded hands for below a buck. At the moment, OP hit the ticker tape at a few pennies shy of $3. Overall, then, we’re looking at a year-to-date performance of roughly 223%.
Second, the Optimism blockchain helps undergird the layer-2 blockchain network of the crypto exchange Coinbase (NASDAQ:COIN). As you know, Coinbase delivered myriad conveniences for retail investors seeking exposure to cryptos. Now, the company wants to do the same for blockchain developers. Essentially, betting on Optimism represents crypto fundamentals you can believe in – not some esoteric word salad.
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.