Although proponents of cryptos to watch often forward the claim that blockchain-derived assets offer an alternative to the fiat monetary system, individual cryptos to watch have not performed that well since hitting a near-term peak around mid-April. No matter what you hear, traditional fundamental catalysts – such as monetary policy – necessarily impact virtual currencies. Otherwise, without a robust economy, how else will people convert cash to digital fun money?
Perhaps most pressingly, the AP recently reported that the banking crisis isn’t over yet. Instead, it’s just a matter of how bad the pain will get. While that’s obviously a headwind for traditional assets like stocks and bonds, the framework isn’t necessarily positive for cryptos to watch. After all, the dollar undergirds our national economy and plays a critical role in global commerce. Cryptos to watch are certainly gaining relevance but they’re not yet comprehensive dollar alternatives.
Finally, revised monthly jobs reports indicate that the Federal Reserve has been successful in sparking a downward trend in labor. However, the push to slow inflation and avoid recession will be extremely difficult. Therefore, investors should approach the below cryptos prudently and cautiously.
Over the last few days, a frenzy of activity pushed the average transaction fee of Bitcoin (BTC-USD) over $7, reaching nearly a two-year high, according to CoinDesk. Moreover, the publication that focuses on all things cryptos mentioned that Binance once again resumed BTC withdrawals on Sunday following a second pause due to the Bitcoin network suffering from unprecedented congestion.
It’s another reminder that virtual currencies incur their own distinct problems that would-be advocates must recognize. From the investor’s perspective, though, Bitcoin needs to find momentum quickly. It’s not enough just to get above the $30,000 level briefly. Instead, the bulls must establish a long-term support line at 30K to eventually attack 40K.
Unfortunately, the problem is that traders at large don’t seem particularly eager to engage BTC and other cryptos. Overall, the volume has been trending downward since roughly the middle of March, even though Bitcoin’s price has jumped higher. Ordinarily, you want to see rising volume confirm rising prices. Without this confirmation, BTC carries a not-insignificant risk profile.
Following a strong showing since March of this year, Ethereum (ETH-USD) and other cryptos to watch disappointed investors recently with lackluster performances. As online publication Decrypt pointed out, after making small gains over the final weekend of April, sector heavyweights like Bitcoin and Ethereum “slowed to effectively nothing” last week. Frankly, that’s not terribly surprising given the slate of ambiguous economic data that we saw.
Moving forward, bullish market participants need to see ETH swing above the 2K price point again. As with Bitcoin, it’s not enough just to briefly breach the aforementioned level. Instead, the bulls need to establish a beachhead if you will. From there, they need to strive for a minimum of $2,500, with the longer-term aim of taking out 3K.
Unfortunately, Ethereum suffers from the save dynamic impacting Bitcoin and many other cryptos. Since roughly mid-March, the volume has generally faded away even though the ETH price moved up. To repeat, technical analysts often look for volume to confirm the price. Therefore, investors should take a cautious approach here.
A critical yet simultaneously controversial entry among blockchain-derived digital assets, Tether (USDT-USD) is distinct from most other cryptos in that it’s a stablecoin. Rather than investors speculating on its price trajectory, USDT is pegged on a one-to-one ratio with the dollar. Fundamentally, Tether facilitates convenience for crypto traders. Rather than converting fiat to virtual currencies for each transaction, traders can elect to store their wealth in Tether units.
However, critics have long wondered about USDT’s backing. According to CNBC, for many years, Tether the enterprise held commercial paper or “short-term, unsecured debt that is issued by companies,” explained the news agency. Eventually, Tether sold all its commercial holdings and moved into U.S. Treasuries, a more stable and reliable asset class.
Unfortunately, the debt ceiling crisis might spark unintended consequences for USDT. Even if nothing bad happens as a result of holding U.S. bonds if the debt ceiling binds, the subsequent crisis might trigger a deep recession. Therefore, even with stablecoins, you want to be careful about your exposure.
One of the more popular but controversial alternative cryptos to watch (or altcoin), because it lacked a “truly” decentralized ecosystem, XRP (XRP-USD) in recent years, has become a rallying cry among blockchain proponents. If you’ve been following the space, you’ll know that XRP founder Ripple Labs incurred the wrath of the U.S. Securities and Exchange Commission (SEC) for alleged securities law violations.
Consistently, Ripple denied the charges. According to FXStreet, Ripple CEO Brad Garlinghouse recently thanked the XRP community for its show of support at a financial conference in Las Vegas. Also, the article mentioned that July 4 could be one of the likely dates when the XRP lawsuit might draw to an end. If the verdict favors Ripple, XRP could soar.
For now, though, the market seems unimpressed. Over the past weekend, XRP has been extremely volatile. Heading into the early hours of Monday morning, XRP lost more than 5% of its market value. As well, XRP suffers from fading volume levels that don’t spark much confidence.
Recently, Cardano (ADA-USD) founder Charles Hoskinson warned about the possibility of another financial crisis similar to what materialized in 2008. In an interview with Fox Business, Hoskinson stated that the traditional banking model has become increasingly outdated. On the flip side, cryptos, in general, demonstrated resilience against rising macroeconomic challenges, per CryptoGlobe.
While Hoskinson has a valid point about banking sector fears, virtual currencies haven’t yet proven viability. Sure, several coins and tokens have been resilient but they’re hardly stable enough to present alternatives to major fiat currencies. For example, ADA popped up almost 48% since the January opener. On the other side of the coin, though, Cardano fell more than 50% in the trailing one-year period.
With volatility like that, cryptos only represent fiat alternatives for Vegas high rollers. For everyone else, that kind of stomach-churning volatility won’t enjoy mainstream integration. Further, ADA has been especially wild, losing about 6% last week. Investors will need to see substantive upward mobility soon. Otherwise, it could be another rough week for Cardano.
One of the most-exciting Ethereum alternatives, Solana (SOL-USD) enjoyed a stellar outing in 2021. At its peak, SOL briefly popped its head above the $250 level on an intraday basis. Unfortunately, it could never sustain that price point. Also, soon thereafter, SOL turned volatile, becoming reminiscent of its acronym (which I can’t say here).
However, Solana fans hope that new life will surge into the ecosystem. According to The Daily HODL, Solana founder Anatoly Yakovenko stated that the SOL blockchain was already set up to handle hundreds of millions of users. In an interview on Token Terminal’s YouTube channel, Yakovenko explained that Solana has the capacity to handle the world’s blockchain requirements.
Fundamentally, that’s wonderful news. However, investors should always be aware that price actions don’t always follow fundamental implications. For instance, on Sunday, SOL conspicuously slipped below its 50-day moving average, signaling near-term pessimism. To be sure, investors shouldn’t pay exclusive attention to the daily ebb and flow. Nevertheless, SOL really needs to move toward the $30 level to spark genuine excitement.
Floki Inu (FLOKI-USD)
Last Friday, I covered the dramatic rise of the meme coin Floki Inu (FLOKI-USD). At the time, FLOKI gained over 40% of market value during the past 24-hour period. Naturally, the burst of sentiment seemingly boded well for other cryptos. Basically, if people are willing to trust a blockchain asset called FLOKI, surely they will trust Bitcoin. As you know, Bitcoin gets a special place on business news outlets’ chyrons.
Of course, the interest in FLOKI also sparked price predictions for the speculative asset. Naturally, most saw sizable gains on the horizon. Revisiting the asset, though, I wasn’t exactly surprised to see that it turned quite volatile. Heading into early Monday morning, FLOKI lost almost 5% of its market value. Since hitting its peak on Cinco de Mayo, FLOKI cratered roughly 32%.
As I write these words, FLOKI continues to decelerate sharply. Fundamentally, it serves as a reminder that you can never get too comfortable with cryptos. And that goes tenfold for speculative meme coins.
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.