Although the virtual currency sector saw some signs of life following a tentative debt ceiling deal, several individual cryptos continue to print unconvincing chart patterns. Therefore, blockchain investors still need to have their wits about them before diving in too heavily.
Breaking news over the Memorial Day weekend was the announcement that President Joe Biden and House Speaker Kevin McCarthy reached an agreement to suspend the debt ceiling, per CBS News. However, celebrations among those wagering on cryptos have been relatively muted. Likely, this pensiveness focuses on the upcoming task: convincing enough lawmakers to pass the legislation.
Notably, CBS stated that “[b]oth Republicans and Democrats are expected to lose some votes, and leaders on both sides have been telling the rank and file that neither side won everything it wanted, as they strive to ensure that the deal has the support to pass both chambers.” So, it’s still possible that Washington gridlock could stymie progress, adding uncertainty for both cryptos and the stock market. Even with a deal fully in place, the underlying narrative might not be a panacea for virtual currencies due to fiscal irresponsibility concerns. Therefore, investors should watch the below cryptos very carefully.
As the crown jewel of cryptos, all eyes center on Bitcoin (BTC-USD) irrespective of whatever else is going on in the blockchain ecosystem. Heading into the Tues. early morning hours, BTC traded hands at around $27,850. This figure represents a near 1% loss over the trailing 24 hours. In the trailing seven-day period, BTC gained nearly 2%.
Nevertheless, the concern for Bitcoin moving forward in the near term is its 50-day moving average. Priced at a little over $28,000 the 50 DMA has acted as upside resistance during the debt ceiling drama over the past long weekend. To be fair, traders shouldn’t read too much into this dynamic.
That said, back in March of this year, BTC blasted through its 50 DMA, which sat at approximately $23,000 at the time. Therefore, the bulls will be anticipating another similar breakthrough above its current 50 DMA. The problem? Volume continues to decline broadly, which may signal an overall lack of buying interest. In conclusion, market participants should be on their toes.
One of the most important cryptos thanks to its market value and fundamental influence over various blockchain initiatives, Ethereum (ETH-USD) also incurred soft trading heading into the early Tues. morning session. In the past 24 hours, ETH dipped about 0.24%. However, in the trailing one-week period, it gained just under 2%.
Somewhat mimicking Bitcoin, Ethereum’s 50 DMA (which stands at around $1,902) imposed a technical ceiling on the underlying price action. However, the main different to BTC is that ETH managed to just clear its moving average benchmark (albeit by the slimmest of margins). Still, unless the bulls push the price decisively higher, ongoing political ambiguities could stifle optimistic sentiment.
As with other cryptos, ETH’s volume level has noticeably declined since the middle of March. Unless acquisition volume starts rising, Ethereum could be at risk of possible downside. Also, cryptos might react poorly to mass layoffs and other economically unfavorable developments. If fewer people end up having high-paying jobs, interest in high-risk investments may plummet.
On the surface level, the rise of Tether (USDT-USD) relative to other stablecoins – or cryptos pegged to a hard currency (typically the dollar) – bodes well for USDT holders. To quickly back up, virtual currency investors appreciate stablecoins as they allow traders to “store” their wealth in blockchain assets. Therefore, traders don’t need to undergo the cumbersome fiat-to-crypto transaction before advantaging opportunities that may materialize.
Recently, Cointelegraph noted that Tether grabbed more market share while other stablecoins stumbled or got de-pegged from the greenback altogether. Unfortunately, some competing stablecoin projects had their financials tied to the bank failures that erupted earlier this year. Fortunately, the folks behind Tether de-risked their exposure amid the banking sector fallout.
Nevertheless, the issue with cryptos of this nature is counterparty risk. Basically, if other parties don’t hold up to their end of the bargain, enterprises like Tether may suffer significant losses. Worse yet, the government is very much unlikely to bail out virtual currency holders. Therefore, investors need to be cognizant of this danger before putting too much wealth at stake.
While most cryptos within the top 10 by market capitalization incurred lackluster trading heading into the Tues. morning session, XRP (XRP-USD) stood out positively. In the trailing 24 hours, XRP managed to gain over 4% of market value. In the past seven days, the digital asset popped up over 7%.
Of course, XRP carries the potential of legal and regulatory precedent, something other cryptos can only dream about right now. To recap, the U.S. Securities and Exchange Commission (SEC) filed suit against Ripple Labs, the originator of the XRP coin. The regulatory agency argues that Ripple skirted securities law while the company argues that because XRP legitimately represents a virtual currency, it did nothing wrong.
Recently, a blockchain-focused publication stated that the SEC may be awaiting the Ripple ruling to decide what it wants to do with popular crypto exchange and platform Coinbase (NASDAQ:COIN). Therefore, a lot could be riding on the courtroom outcome beyond XRP. Watch this space carefully.
Symbolizing one of the most popular alternative cryptos or altcoins, Cardano (ADA-USD) enjoyed a relatively decent outing heading into the Tues. morning session. In the trailing 24 hours, ADA gained a modest 0.3%. Over the past seven days, it gained more than 2% of market value. Should speculators anticipate another rally for ADA?
As with Bitcoin, Cardano’s 50 DMA (which stands at 38.8 cents) effectively imposes upside resistance. At time of writing, ADA trades hands at 38 cents. Of course, for your average investor to have confidence in the current setup, ADA needs to blast above its nearer-term moving average. Unfortunately, declining volume levels (particularly declining acquisition volume) poses significant challenges.
Certainly, it’s possible that the bulls could be recharging for another rally higher. At the same time, broader interest could be fading. Again, with rising economic challenges such as layoffs and record-high consumer debt ($17 trillion worth!) taking their toll, fewer people may be interested in speculative assets like cryptos. As with the other blockchain assets above, a cautionary approach may be prudent.
A fan favorite during the heyday for cryptos back in 2021, Solana (SOL-USD) at its peak traded at nearly $250 a pop. At the moment, one unit of SOL can be had for just under $21. So, if you believe in relative discounts, Solana could be interesting. In the trailing 24 hours, it gained almost 1%. And in the past one-week period, the coin moved up 4%.
Although enticing compared to its glory days, Solana faces a difficult crossroads. Recently, SOL tested its support line as represented by its 200 DMA (which sits at $19.19). However, it’s also sandwiched by the 50 DMA ($21.68) above, a condition similar to other cryptos.
Likewise, for lay investors to have confidence in Solana, the bulls need to decisively push it beyond its 50 DMA. Ideally, market optimists should push the price to $25 in a broader bid to take out $30. Unfortunately, continued lackluster trading could see interest wane. Ominously, its trading volume faded sharply when compared to mid-March. Again, a cautionary approach may be your friend.
For investors that don’t mind taking potshots, Filecoin (FIL-USD) may be one of the most fundamentally compelling enterprises. While seemingly most blockchain projects focus on transactional expediency, Filecoin represents an economic ecosystem centered around data storage. In other words, rather than pay cloud computing giants like Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) or Amazon (NASDAQ:AMZN) for data storage services, users can instead leverage the power of the blockchain.
Here, the key advantage is participation. Those who have extra storage to spare on their systems can “donate” that space. In return, they receive the underlying blockchain reward token. Of course, for this network to make practical sense, said reward must have a non-zero value. Enticingly, Filecoin sits just outside the top 30 of all cryptos in terms of market cap.
While a promising project, FIL carries higher risks than your average top-tier cryptos. Right now, FIL trades hands at $4.62 a pop, below both its 50 and 200 DMAs. Still, for ultimate upside potential, Filecoin may warrant further investigation.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT and XRP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.