With cryptos to watch struggling to break out of a frustrating horizontal consolidation pattern, investors may be tempted to jump aboard the contrarian approach. Typically, virtual currencies don’t stay rangebound for too long. Also, the sector commands incredible, perhaps even unparalleled loyalty. Thus, it might seem an ideal time to speculate on blockchain assets.
Nevertheless, under the framework that cryptos rarely stay flat, it’s also possible that the resolution may materialize to the downside. Fundamentally, circumstances don’t necessarily bode well for risk-on assets, especially cryptos. For example, while the announcement may be largely symbolic, the recent Fitch downgrade of the U.S. long-term foreign currency rating symbolizes a brewing concern in the economy.
In other words, Fitch wouldn’t issue a downgrade just because. Therefore, investors need to be cognizant of significant broader headwinds.
Further, even hardcore advocates of cryptos must recognize that prior bullish sentiment among retail traders has slipped sharply. A few months ago, Business Insider pointed out that retail investors “rage sold” out of the equities sector. It’s more than possible that this phenomenon has been replicated in digital assets, warranting healthy skepticism.
Cryptos to Watch: Bitcoin (BTC-USD)
In the wee hours of the Aug. 8 session, Bitcoin (BTC-USD) finds itself trading hands at $29,220. This represents a very modest increase over the past 24 hours. In the trailing seven days, BTC gained a bit over 1%. Still, it’s no cause for celebration because Bitcoin remains stubbornly below the $30,000 level, a key psychological level.
Adding to concerns, Bitbank crypto analyst Yuya Hasegawa warned that cryptos basically sit in a wait-and-see mode. “The next stop could be around $28,000,and given the market’s heightened concerns … recovery above $30,000 in the next couple of days is likely off the table,” said the expert.
Nexo co-founder and managing partner Antoni Trenchev remarked that the third quarter tends to be Bitcoin’s weakest. “On the downside, Bitcoin can fall to $25,000 and it wouldn’t be a travesty but ideally it needs to stay above the 200-week moving average around $27,300 as it tends to tell us if Bitcoin is in a bullish or bearish trend.”
I don’t mention these things to frighten anyone away from virtual currencies. Rather, you just need to be aware of the risks.
Cryptos to Watch: Ethereum (ETH-USD)
At time of writing, Ethereum (ETH-USD) trades hands at roughly $1,834. Unlike Bitcoin, in the trailing 24 hours, ETH slipped about 0.2%. Further, in the past seven days, ETH gained less than half a percent, hardly encouraging figures. Overall, frustration mounts for the number two blockchain asset by market capitalization. Understandably, bulls are on a mission to breach the psychologically significant 2K level.
However, investors need to be patient and avoid too many big moves. In my opinion, the present juncture may facilitate an exercise in letting the market speak to you before diving in. Critically, ETH trades beneath its 50-day moving average (at approximately $1,880) while above its 200 DMA, which sits at $1,788.
Ideally, the bulls need to start moving the Ethereum price close to the $1,900 level. Fundamentally, weak-hand traders have plenty of reason to dump out of risk-on assets like cryptos, as mentioned earlier. Therefore, you don’t want to be holding the bag when the selloff begins. Again, it’s not about scaring people away from blockchain assets. You just want to make smart decisions.
Cryptos to Watch: Tether (USDT-USD)
As a stablecoin, Tether (USDT-USD) offers a different approach compared to most other cryptos. Whereas digital assets garnered a reputation for robust capital gains over a short period of time, Tether is pegged (allegedly) on a one-to-one ratio with the U.S. dollar. Therefore, one buck gives you one unit of USDT. Primarily for convenience, Tether enables investors to hold their wealth in crypto-denominated terms, thus offering easy transactions.
Typically, Tether rarely deviates from its 1:1 ratio with the greenback. If it does, we’re talking minuscule figures, such as 0.9999 dollars for one USDT. However, Tether at the time of writing trades hands for 0.9986 dollars for one USDT. What’s even more peculiar, Tether lost about 0.12% over the trailing one-week period. When USDT loses value, we’re usually talking about thousands of a percentage points.
Don’t get me wrong – I’m not sounding the alarm. However, it’s odd to note that Fortune’s latest warning is that a Tether selloff could spark a crisis for cryptos. Certainly, you want to manage your risks.
On paper, XRP (XRP-USD) represents the one name among all cryptos that should be breathing a sigh of relief. After much courtroom drama and boatloads of speculation, a U.S. judge rules that XRP token purchases via exchanges did not constitute securities-related transactions. Of course, the decision represented a massive win for XRP founder Ripple Labs. It also strengthened the case for Coinbase (NASDAQ:COIN) in its regulatory legal battle.
Unsurprisingly, XRP shot to the moon upon the disclosure, at one point breaching past the 90-cent level. However, the euphoria of the legal victory faded rather quickly. At the time of writing, XRP trades hands at 62.5 cents, almost at parity during the past 24 hours. However, in the past one-week period, the token lost more than 9% of its market value.
According to FXStreet, XRP whales or big-time holders dumped 100 million XRP units. To put it bluntly, the whales went from holding on for dear life (HODL) to taking profits. It’s a brutal lesson but an important one for cryptos or any other risk-on asset: always always always look out for number one!
One of the most exciting opportunities among cryptos during bull runs, Cardano (ADA-USD) unfortunately suffers a dark side. When circumstances go sour for blockchain assets, ADA seems to absorb the brunt of the damage. In the past 24 hours, the coin slipped about half a percent. Over the trailing seven days, ADA gave up a rather sharp 4% of market value.
While all virtual currencies could use some good news, I believe Cardano desperately needs a powerful bullish catalyst. Since Aug. 3, ADA slipped beneath its 50 DMA, which clocks in at 29.9 cents. At the moment, the coin carries a price tag of 29.2 cents. However, its 200 DMA is conspicuously above the muck, standing at 35 cents.
Put another way, floundering in the mud near 29 cents is not what Cardano advocates need. Ideally, the bulls need a path back to the 37-cent level, where some horizontal support lies. Otherwise, ADA may test lower support lines, first at 26 cents and then at 24 cents.
If there was one name among the major cryptos to speculate on, it just might be Solana (SOL-USD). That’s not to say that SOL operates under its own paradigm. Generally, whatever ails other virtual currencies will also likely negatively impact top-tier coins and tokens. However, SOL does seem more promising than many of its peers.
At first glance, Solana doesn’t appear to be anything that special. In the trailing 24 hours, the coin gained just a hair above parity. In the past one -week period, SOL dipped a bit more than 1%. However, it has rebounded sharply since dropping to a low of around $14 during the mid-June session. Right now, SOL trades hands at over $23 per unit.
Even better, SOL runs noticeably above its 50 DMA (at $21.97) and its 200 DMA (at $21.49). Intriguingly, The Daily HODL points out that as crypto whales collect their profits on Bitcoin, they may be eyeballing Solana. That might explain why the technical posture of SOL seems attractive.
In fairness, it’s a risky trade. Still, the opportunity for speculators is available.
Shiba Inu (SHIB-USD)
One of the most extreme ideas among cryptos – or any risk-on asset class for that matter – Shiba Inu (SHIB-USD) is a divisive trade. Either you love and appreciate the underlying SHIB token and its colorful community or you hate it, labeling it a complete waste of time among many other pejoratives that I can’t repeat here. Generally, there are no in-betweens with Shiba Inu.
That said, irrespective of one’s feelings toward the speculative asset, it’s been making a name for itself. At the moment, SHIB carries a market cap of approximately $5.28 billion. Based on this valuation, it ranks as the 14th largest blockchain asset – and by a sizable margin over number 15.
Interestingly, while Shiba Inu gave up more than 3% of market value in the past 24 hours, it shot up over 8% in the trailing week. Apparently, crypto insiders suggest that whales have accumulated a significant number of SHIB tokens. If so, this may also explain why appears to command a relatively strong technical chart.
I wouldn’t go crazy about it. However, the prospect of extreme gambling is available.
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.