With regulators taking possession of First Republic (NYSE:FRC), the third U.S. bank failure this year may have significant consequences for cryptos. Specifically, many analysts believe that virtual currencies jumped higher on the financial crisis narrative. In other words, blockchain-derived assets acted as an alternative safe haven. However, with the federal government in concert with big banks stepping in immediately, a crisis may have been averted.
Now, without a cynical catalyst, cryptos might encounter some headwinds. Nevertheless, the same experts believe that other fear trade-related factors, such as a possible recession, could be productive for virtual currencies. I wish I shared the same confidence.
On an elemental basis, governments buttressing bank failures is inflationary. Essentially, the money to support depositors has to come from somewhere. And should this dynamic lead to higher prices – though to be fair, it’s a debated point – it might lead to the Federal Reserve aggressively raising the benchmark interest rate again. Frankly, that’s not a great selling point for digital assets. With that in mind, below are seven cryptos to watch this week.
| BTC-USD | Bitcoin | $28,419.10 |
| ETH-USD | Ethereum | $1,859.31 |
| USDT-USD | Tether | $1.00 |
| BNB-USD | BNB. | $323.90 |
| ADA-USD | Cardano | $0.38 |
| SOL-USD | Solana | $21.86 |
| LTC-USD | Litecoin | $87.68 |
Bitcoin (BTC-USD)
After an impressive performance so far this year, Bitcoin (BTC-USD) encountered some notable struggles. While BTC gained nearly 2% of market value in the past seven days since Monday night, in the trailing 24 hours, it fell more than 4%. That’s understandable given the questions about fiscal stability following the failure of First Republic. Moving forward, investors will want to watch Bitcoin’s chart pattern carefully.
Specifically, the benchmark of all cryptos might be in the middle of charting a bearish head-and-shoulders pattern. It’s possible that the price action between January through February created the first shoulder. Recently, BTC may have printed the head. Should we encounter another fall, then another pop higher (but not exceeding the head), it could be a head-and-shoulders pattern.
Of course, I can’t say for certain that’s the case. At the very least, though, investors should be prepared for that outcome. With broader fundamentals in my view not aligning favorably with Bitcoin, you’ll probably want to tread carefully.
Ethereum (ETH-USD)
As with Bitcoin above, Ethereum (ETH-USD) produced an overall impressive performance so far this year. At its peak, ETH managed to poke its head above the $2,100 level. Unfortunately, it finds itself trading a little bit over $1,800. In the trailing week, Ethereum slipped about half a percent below parity. However, in the past 24 hours, ETH fell almost 3%.
Similar to Bitcoin, Ethereum is at risk of charting a head-and-shoulders pattern or some variation of it. In this case, the first should be represented by the pop higher between mid-January through late February/early March. Then, roughly around the middle of April, ETH spiked above $2,100. From here, the coin could fall toward its 200-day moving average (which sits at $1,524) before rising back up.
During this ascent, if Ethereum nears the April peak but doesn’t quite get there, watch out! We could be looking at a classic bearish chart pattern. With circumstances not looking great for risk-on assets like cryptos, approach ETH with caution.
Tether (USDT-USD)
While directionally mobile cryptos like Bitcoin and Ethereum naturally capture headlines, stablecoins – particularly Tether (USDT-USD) – really undergird the blockchain ecosystem. Fundamentally, Tether keeps the cogs of blockchain-based transactions well-lubricated. For retail investors, one of the primary benefits centers on convenience. Rather than fiat currencies to their virtual counterparts, investors can “hold” their wealth in dollar-pegged USDT. This way, they can stay in crypto land and respond immediately to compelling opportunities.
However, Bitcoinist recently noted that the number of Tether deposits on exchanges dwindled, slipping to a seven-day average of 579,536 units. That’s the lowest figure in the past three months since January. Critically, the amount of Tether available on exchanges represents a key liquidity indicator for other cryptos. Thus, the drop in USDT deposits may indicate a decline in demand for digital assets.
Still, anything can change – and change rapidly – in the blockchain ecosystem. Therefore, the above dynamic offers no guarantee of bearish pressure. Still, it’s something to keep in mind if you’re heavily involved in cryptos.
BNB (BNB-USD)
Out of the major cryptos, BNB (BNB-USD) arguably posts one of the more credible chart patterns. Unusually, though, its near-term stats don’t seem to reflect this deduction. In the trailing seven days, BNB slipped more than 1%. In the past 24 hours, the banking sector news rattled the coin, sending it down a little more than 3%.
Still, since the beginning of this year, BNB gained over 34% of its market value. Some of the enthusiasm centers on coin-specific news. In particular, BNB’s underlying Binance exchange will help support the launch of a new crypto initiative. For much of this year, BNB’s 50 DMA acts as a solid rising support line.
Nevertheless, investors will want to monitor the goings on of other cryptos. If circumstances get squirrely for risk-on assets, BNB could suffer a correction. Under negative pricing pressure, stakeholders should look for the 200 DMA (which sits at $298) to hold. Otherwise, falling below this level may spark ugly volatility.
Cardano (ADA-USD)
Speaking of volatility, Cardano (ADA-USD) has been a wild asset in the past few years. Both vexing longtime stakeholders while also giving them brief glimmers of hope, ADA has held up the fort well recently. In the past seven days, Cardano actually gained almost 1% of market value. And in the past 24 hours, it only lost a little more than 1%.
At the moment, ADA trades hands at just under 39 cents, essentially putting it at parity with its 50 DMA. Further, this shorter-term average stands conspicuously above its 200 DMA, which comes in at 35 cents. So, the good news here is that like other cryptos, bullish traders are attempting to hold onto key support lines.
On the other hand, the not-so-great news is that volume has overall been declining since early this year. Stated differently, rising prices are not meeting rising volume. Ordinarily, you’d like to see volume confirm the price action, which just isn’t happening here.
Solana (SOL-USD)
One of the top-tier alternative cryptos or altcoins of 2021, Solana (SOL-USD) hit around $250 at its peak in 2021. Since then, it’s been a dreadful decline from its heyday, though the “discount” provides speculators with food for thought. In the trailing week, SOL popped up a stout 3%. However, it slipped more than 1% on Monday following First Republic’s failure.
Solana presents an intriguing case because, around mid-April, its 50 and 200 DMAs converged at the same price. Since then, the former moved higher to $21.82 while the latter slipped down to $20.35. Subsequently, Solana’s price point matches that of its 50 DMA.
For investors to have confidence in the space, the bulls will need to start pushing SOL to at least the $25 price point. Otherwise, Solana may suffer due to a common problem among cryptos this year: fading volume. While levels spiked conspicuously higher in Jan., since then, the volume has been muted.
Litecoin (LTC-USD)
Once the original altcoin, Litecoin (LTC-USD) doesn’t seem to get much love anymore. Recently, a blockchain mining enterprise launched a new system to boost mining for two cryptos, one of them being Litecoin. However, the news didn’t seem to materially impact LTC. In the trailing week, the coin slipped almost 2%. In the past 24 hours, it declined by half a percent.
Looking at the charts, Litecoin presents significant near-term concerns for stakeholders. From late March through late April, LTC largely rode its 50 DMA as a support line. Unfortunately, in recent sessions, the coin fell below its 50 DMA, which stands at just under $90. Right now, LTC trades at roughly $86.50. Unless bullish energy enters the space, Litecoin could fall back down to its 200 DMA, which sits at $80.
As stated with other cryptos, Litecoin incurred declining volume trends since approximately mid-March. Ideally, you’d like to see this narrative reverse itself. Otherwise, downside action wouldn’t be out of the question.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, and LTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
