With another exciting week in the cryptocurrency market in the bag, the excitement for another resurgence in cryptos to watch is palpable. Fundamentally, decentralized distributed digital assets offer a clear alternative to the traditional fiat currency system. With the banking sector melting down recently, many believe virtual currencies may have their moment to shine. To be sure, the total market capitalization of all cryptos now stands at $1.16 trillion, firmly above the trillion-dollar benchmark. Several individual coins and tokens have jumped into positive territory on a trailing-week basis. Further, chatter online points to potentially big moves ahead.
On the other hand, decentralized financial protocols don’t necessarily provide confidence for arguably most people. After all, if something goes awry, investors often have little to no recourse. Further, if the banking sector contagion spreads, that wouldn’t necessarily be a positive for cryptos to watch due to the economic damage negatively impacting discretionary funds earmarked for blockchain-derived assets. Overall, it’s one of the most difficult circumstances to navigate. Therefore, investors will want to approach the below cryptos to watch with careful deliberation.
Cryptos to Watch: Bitcoin (BTC-USD)
A crowd stunner, Bitcoin (BTC-USD) gained nearly 15% in the trailing week. At the moment, BTC trades just underneath the $28,000 level. This puts the king of cryptos within arm’s distance of the critical $30,000 mark. Should BTC get there, the move may spark renewed enthusiasm among investors that have been beaten up throughout 2022.
Nevertheless, investors shouldn’t abandon discipline here. Specifically, market participants should pay close attention to the “megaphone pattern” that developed in late January till now. Based on the principles of technical analysis, Bitcoin could rise higher from here. However, the pattern could also signal a head-fake before proceeding downward.
Before making the tough decision, investors should also watch the volume trend. Since March 14, the volume has been trending down while the price has been moving higher. Typically, you’d like to see volume confirm the price action. Fundamentally, everything could ride on the Fed. If the central bank strikes a hawkish tone regarding monetary policy, BTC and other cryptos could drop.
Cryptos to Watch: Ethereum (ETH-USD)
The ever-present number two among cryptos by market cap, Ethereum (ETH-USD) provided a decent performance. In the past week, ETH gained over 4% of market value, though it certainly operated under Bitcoin’s shadow. Still, at the time-of-writing price of $1,750, Ethereum is well within reach of the critical $2,000 level it needs to spark a robust recovery.
Interestingly, ETH also printed a similar megaphone pattern, though it’s far less pronounced than the one Bitcoin flashed. Technically speaking, it’s possible that this pattern may symbolize a recovery initiative. Notably, since hitting bottom in June of last year, ETH printed a series of higher lows.
Thus, without enough support, ETH may be able to break above the 2K ceiling. However, the volume may be a warning sign. Just like with BTC, Ethereum’s volume has trended down as prices increased. Again, you usually want to see volume confirm the price action. Also, the Fed’s monetary policy weighs heavily on ETH and other cryptos. If the central bank strikes an accommodative tone, ETH may swing dramatically higher. If not, watch out!
Cryptos to Watch: Tether (USDT-USD)
On paper, the popular stablecoin Tether (USDT-USD) looks like the beneficiary of the banking crisis. As the Wall Street Journal pointed out last week, Tether’s market cap jumped 10% to $73 billion. In contrast, its main rivals suffered conspicuously sharp losses. At the moment, the value of USDT stands at just under $77 billion. Seemingly, the train keeps rolling.
Nevertheless, investors should be aware of a critical irony: Tether and other stablecoins may be subject to “bank runs” as well. In fact, last year, Tether whales (or bigwig stakeholders) rushed to redeem $16 billion worth of USDT following the collapse of an algorithmic-driven stablecoin project. Therefore, it’s not out of the question for a similar bank run to materialize again.
Further, the operation undergirding Tether remains mysterious. While curt responses to questions suggest that Tether is on the up and up, we really don’t know. Therefore, it’s also possible that should USDT not be backed on a one-to-one basis with the underlying paper (fiat) assets, a run on the stablecoin can quickly spark. Therefore, investors should exercise the same caution with USDT as with other cryptos.
A long-suffering virtual currency, Cardano (ADA-USD) tends to underperform relative to other cryptos. So far this week, it’s the same story. Against the price seven days ago, ADA gave up almost 3% of market value. Frankly, that doesn’t do much for confidence regarding the upside viability of other digital assets.
Looking at the charts, ADA simply has a most unusual pattern. Following a sharp erosion of value from mid-February, Cardano began bouncing higher on March 12. However, its accelerative properties slowed down. In addition, the volume has been trending down. Again, we have a familiar warning sign: volume doesn’t confirm the bullish price action.
For Cardano to generate broader confidence, it must secure the 45-cent level as a bare minimum. From there, its main upside target would be to breach the $1 level and build a support line there. That’s a very tall order considering that ADA has been trading below 45 cents for several months now.
While many cryptos performed well over the trailing week, many others did not. For instance, Polygon (MATIC-USD) absorbed a sizable hit over the past 24 hours, shedding about 5%. This led to MATIC incurring a more than 6% loss in the past seven days. Naturally, the red ink raises the question of whether or not the virtual currency complex can move higher from here.
Like Cardano above, Polygon printed a distinct chart pattern. Following a sharp loss since the back half of February, MATIC bounced higher from March 10 onward. However, its volume level slowly decreased since then, raising questions about the rally’s longer-term viability. Without volume confirming price action, it’s difficult to have confidence in the present setup.
As well, the specter of the Fed’s monetary policy clouds both stocks and cryptos. If policymakers continue with raising borrowing costs, the subsequent deflationary forces could impact the labor market. Just recently, Amazon (NASDAQ:AMZN) announced layoffs, reflecting broader tech sector weakness. Should the job cuts continue, fewer people will have the money to speculate on cryptos.
Demonstrating the oddball nature of cryptos recently, one might presume that Solana (SOL-USD) would perform poorly given the lackluster showing of the prior two assets. However, Solana has been killing it over the past week, gaining 9% of market value. Therefore, those looking for signs of confidence in the blockchain ecosystem should focus on SOL. Still, it’s going to be interesting to see how the narrative pans out. Between late Feb. through early March, Solana incurred a sharp series of losses. However, from March 10 onward, SOL sparked a sizable rally. At the moment, though, the rally paused for breath at the juncture where SOL’s 50 and 200-day moving averages nearly converge.
As I sit here, SOL is right on the 50 DMA but slightly below the 200 DMA. Therefore, Solana stakeholders will be looking for a major catalyst to break the deadlock. Of course, that deadlock comes in the form of the Fed. The will-it-or-won’t-it nature of monetary policy suggests that Solana is really only appropriate for hardened speculators.
Adding another wrinkle to the proceedings for cryptos stands Polkadot (DOT-USD). Previously labeled an Ethereum killer, Polkadot neither impressed over the past week nor did it collapse. Instead, it’s up barely at the time of writing, gaining just under 0.4%. I can’t emphasize how difficult it is to get a grasp on digital assets right now.
Technically, the chart pattern for DOT has been all over the map this year. However, it follows a similar sequence of events compared to other alternative cryptos. Since dropping sharply from late February, DOT hit bottom on March 10. Since then, the blockchain asset has been steadily moving higher. Unfortunately, this rally also occurs on declining volume, raising credibility concerns.
Also, DOT finds itself sandwiched between the 50 DMA at the top and the 200 DMA at the bottom. Granted, stakeholders are looking for a catalyst to break out of its present status. However, with Fed policy presenting a major unknown, investors will want to approach it carefully.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDC, and ADA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.