Although the cryptocurrency market has been incredibly resilient so far this year, investors must now have to contend with a curveball, which may ultimately have negative implications for cryptos. Specifically, the Organization of the Petroleum Exporting Countries (OPEC) and other oil-producing nations – an alliance known as OPEC+ – imposed production cuts. The surprise move amounts to a reduction of around 1.16 million barrels per day.
Here’s the deal. On paper, the decision to reduce energy resource output will be inflationary: more dollars will chase after fewer goods. Theoretically, this narrative bodes well for cryptos. Indeed, several digital assets moved very little during the past 24 hours or gained some market value. However, the Federal Reserve may be forced to aggressively raise interest rates to combat the sudden inflationary headwind. Obviously, higher borrowing costs won’t likely be beneficial for virtual currencies. Therefore, investors need to examine the present narrative of cryptos very carefully.
At the moment, Bitcoin (BTC-USD) stands at a fork in the road. Per data from Coinmarketcap, in the past 24 hours, BTC gained about half-a-percent of market value. In the trailing seven days, it’s up a little over 3%. Technically, circumstances appear to bode well for Bitcoin, with the asset above both its 50- and 200-day moving averages.
Still, the sideways action of BTC since the second half of March is emblematic of the ambiguities associated with cryptos. Much of the hesitation surrounding Bitcoin centers on the relationship between its price action and volume. Ordinarily, as market valuations rise, you want to see volume trends confirm the bullishness; that is, rising volume should support rising prices.
Instead, the opposite circumstance materialized. Since around the middle of March, volume has generally declined while BTC’s price increased. Moving forward, if Bitcoin is truly on an upswing, it needs to breach the $30,000 resistance level. Otherwise, a trip down to its 200 DMA (at $20,511) could be in the cards.
As with other major cryptos, Ethereum (ETH-USD) seeks a major catalyst to break out of its present horizontal price action. In the past 24 hours, ETH gained nearly 2%, which is robust. Also, in the trailing week, the coin gained over 5% of market value. Overall, it’s an impressive performance. Like Bitcoin, Ethereum trades above its 50 DMA ($1,671) and 200 DMA ($1,441).
Nevertheless, ETH also suffers from the same ambiguity affect BTC and other popular cryptos. Since March 14, Ethereum trudged higher while its volume level noticeably faded. Again, you’d like to see rising volume confirm rising prices. Otherwise, the framework does leave the underlying asset vulnerable to downside action from weak-hand players.
If the bulls decide to take control of the ETH market, the coin must breach $2,000 and establish a baseline of support. From there, it must undertake a credible journey to 3K. Failing that, the downside risk for Ethereum has got to be its 200 DMA, if not lower.
As the implosions of two major U.S. regional banks demonstrated recently, when a panic erupts in a financial ecosystem, it pays to be first. And this lesson applies to Tether (USDT-USD) and other cryptos, whether they’re stablecoins like USDT or assets driven by speculation for capital gains. You can debate among friends, family and strangers about who’s smarter later. But most importantly, it’s critical to be first.
While I don’t believe that Tether will crash – in part because its implications will be horrific for practically all other cryptos – it’s not a zero-probability event. Moreover, investors really need to pay close attention to the OPEC+ energy cuts. Essentially, foreign governments feel emboldened to challenge the U.S. and its interests. Unfortunately, this backdrop makes Fed Chair Jerome Powell’s job all the more complicated.
Basically, Powell recognizes that not addressing inflation now can lead to serious consequences later. With the OPEC+ cuts, he’ll presumably need to double down on this thesis. That’s not a great outlook for “traditional” cryptos nor for stablecoins like Tether. So, be careful about your risk exposure.
For years, the narrative of XRP (XRP-USD) almost exclusively centered on its underlying lawsuit. Ripple Labs, the creator of XRP, attracted the ire of the U.S. Securities and Exchange Commission (SEC). To make a long story short, the SEC accused Ripple of skirting securities law. In response, Ripple stated that XRP is not a security but a blockchain-derived asset, similar to most other cryptos.
While the lawsuit initially sent jitters in the blockchain ecosystem, leading several exchanges to stop supporting XRP, it does have its silver lining. Basically, if Ripple emerges victorious in the case, XRP will benefit from legal precedent. That’s something not even almighty Bitcoin can claim, making XRP unique among cryptos.
Still, no one guarantees Ripple a legal victory and this tense ambiguity occasionally wreaks havoc on XRP’s pricing. Besides, with the recent banking failures, government authorities will probably be biased toward greater regulation of cryptos, not less. Therefore, approach XRP with caution.
One of the most disappointing cryptos based on a comparative performance standpoint, Cardano (ADA-USD) occasionally provides excitement in the space. On Monday night (or early Tuesday morning for the east coast folks), Cardano gained a staggering 12% of market value. That’s based on a trailing week timeline. It turned out to be the second-best performance during the period among digital assets ranked in the top 10 by market capitalization.
So, is Cardano finally making good for beleaguered stakeholders? Admittedly, the bulls have a compelling argument. Last week, ADA found itself just under its 50 and 200 DMAs, which converged at almost the same price point. However, at time of writing, Cardano popped up to 39 cents. In contrast, the 50 and 200 DMAs stand around 36 cents.
While ADA made impressive performance, now comes the hard part: ideally, Cardano should build a support line between 45 cents to 50 cents. From there, it must take a shot at the psychologically important threshold of $1. However, that’s a tall order.
For best performance in the near term, the award goes to – who else? Meme-coin favorite Dogecoin (DOGE-USD). In the past 24 hours, DOGE gained over 24% of market value, a blisteringly strong outing. Over the trailing week, Dogecoin returned stakeholders more than 33%. Presently, it’s ranked number eight in terms of market cap.
According to a CNN Business report, DOGE jumped as Twitter CEO Elon Musk replaced the social media platform’s traditional bird icon with an image of a Shiba Inu – an apparent nod to Dogecoin. On a personal note, I’m relieved this was the case. For a moment there, I thought my Twitter account got hacked. Still, I’m not sure how sustainable this rally is. Yes, the move is incredibly encouraging for cryptos broadly. At the same time, we’ve seen Dogecoin skyrocket, only to crumble later (see last Oct. to Nov.).
On another personal note, I’ve had to say goodbye to Dogecoin. Unfortunately, I received word that one of my crypto trading platforms will no longer do business in the U.S. Given the volatility of cryptos lately, I decided to call it a day on Dogecoin.
Finally, investors should take a look at Solana (SOL-USD). Arguably the most interesting setup among cryptos ranked in the top 10 by market cap, SOL enjoyed a decent performance. In the trailing one-week period, SOL gained nearly 3% of market value. However, it’s anyone’s guess where SOL heads from here on out.
Conspicuously, SOL trades hands at $20.38, just below its 50 and 200 DMAs, which converged at about the same price. Also, it seems as if the moving averages squeezed the price action of Solana into a funnel. Typically, at the culmination of such a squeeze, a major move ensues: either a breakout or a breakdown. Of course, crypto bulls will be hoping for the former.
However, the latter scenario isn’t out of the question. Again, with OPEC clamping down on oil supplies, inflation may skyrocket, leading to a response from the Fed. That’s probably not going to be too helpful for speculative risk-on cryptos like Solana.
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.