While debate rages on about the possible approval of an exchange-traded fund based on the spot price of the benchmark cryptocurrency, individual cryptos have again suffered lackluster trading. In what seems to be another week of sideways consolidation, investors need to be extremely cautious with decentralized digital assets.
While not a comprehensive insight, the options market for popular blockchain enterprises doesn’t provide much room for confidence. For example, Marathon Digital (NASDAQ:MARA) is one of the biggest miners of cryptos. However, its implied volatility (IV) trend shows that while activity is heightened at upper strike prices, it has spiked the most in the lowest strike prices.
Further, the same can be said about Riot Platforms (NASDAQ:RIOT). While IV moves up alongside rising strike prices, it spikes the most – by a wide margin – at the lowest strike price. Stated differently, it appears that the smart money is hedging for catastrophic risks against the blockchain miners. That’s not a great look for cryptos, to be honest. Still, investors should consider the merits of each individual coin or token. With that, below are the top cryptos to watch this week.
As was the case last week, Bitcoin (BTC-USD) finds itself struggling for traction. Over the past 24 hours heading into early Tuesday morning, BTC gained just under 1%. However, this print overlooks the more worrying data point of the coin dropping below $26,000. At the moment, BTC trades hand at around $25,900.
To be sure, much of the mainstream media attention focuses on the drama associated with the approval of a spot Bitcoin ETF. Should a green light be given, I’m certain that BTC will at least temporarily skyrocket. However, where it goes from there is anyone’s guess. After all, it’s not the first time that a supposed legal victory failed to yield sustained gains.
Fundamentally, investors of Bitcoin and other cryptos should be concerned about the viability of the retail investment community. For example, with Americans’ credit card debt shooting over the $1 trillion mark, an economic slowdown leaves many investors vulnerable. Especially right now, the ecosystem doesn’t seem favorable for risk-on assets like virtual currencies. Therefore, I would maintain vigilance.
The number two cryptocurrency by market capitalization, Ethereum (ETH-USD) finds itself sadly on familiar ground. Right now, ETH prints a value of $1,585, thus moving in the wrong direction. In the past 24 hours, ETH dipped about 1.7%. Over the trailing one-week period, the popular digital asset fell 2%.
As with Bitcoin above, Ethereum seeks an upside catalyst. What the difference is now is that time may be of the essence. Roughly speaking, ETH gained around 32% of market value since the beginning of the year. However, in the past 30 days, ETH fell more than 14%. Presumably, the bulls need to start picking up the slack lest the bears smell blood.
Further, my hesitation centers on the aforementioned options trading dynamic impacting blockchain miners. If cryptos fall, the mining sector generally plunges as well. So, it appears that the options traders – the smart money – recognize this risk; hence, the spiked IV in the extreme-low strike prices. Of course, as a longtime believer in cryptos, I want to express better news. However, the data must take priority over narratives.
For those new to cryptos, Tether (USDT-USD) is – so far anyway – the most valuable stablecoin. This type of cryptocurrency is pegged to a hard (fiat) currency, usually the dollar as is the case with Tether. Therefore, investors who acquire USDT units usually don’t do so for capital gains purposes (aside from complex arbitrage trading schemes). Rather, it’s a form of convenience and wealth “storage.”
Basically, Tether is the oil that keeps the blockchain engine running smoothly. By holding wealth in USDT, market participants can advantage of opportunities within various cryptos quickly and conveniently. With ample volume and velocity, the ratio between USDT and the U.S. dollar should be one-to-one. If minor blips occur, they should be miniscule.
However, the problem is that for the last several weeks, I’ve noticed on multiple occasions that Tether traded conspicuously below the 1:1 ratio. While I don’t anticipate a complete failure of the peg, I’m worried about the implied lack of confidence. Again, I’m not necessarily worried about a crypto bank run. Still, you want to take the time here to manage your risk exposure accordingly.
Once the promising name among cryptos thanks to its positive regulatory nod, XRP (XRP-USD) finds itself back in the weeds. By every practical measure, XRP has lost all the gains associated with becoming the virtual currency with legal precedence, stemming from creator Ripple Labs’ generally favorable courtroom result.
At the moment, XRP lost about 3.5% in the trailing 24 hours. In the trailing seven days, the crypto dropped more than 5%. Priced at 47.9 cents, it’s only a bit higher than the 47.1 cent price that XRP started off at for the memorable July 13 session. Now, with XRP trading below its 200 DMA (51 cents) and 50 DMA (58 cents), circumstances seem far less auspicious.
One inkling of optimism is that strong horizontal support exists at approximately the 47.5-cent line. However, it’s a double-edged sword. If XRP fails to move higher from where it presently sits, the bears could come out in full force due to the ugly technical profile. As has been the case for the last few weeks, let the buyer beware.
When it comes to assessing Cardano (ADA-USD), all I can think of is that it’s flirting with danger. Ranking among the most popular alternative cryptos or altcoins, ADA commands a cult-like status. Still, that hasn’t been enough to bolster ADA. Currently, the coin trades hands at 24.7 cents, down roughly a third of a percent in the past 24 hours. In the trailing week, it slipped more than 3%.
Technically, Cardano will likely suffer great difficulty in generating credibility. Following a flat-to-negative performance since the start of 2023, ADA tanked roughly 51% in the past 365 days. Unfortunately, investors may lose confidence, given the lack of upside impetus. In addition, volume trends have gradually declined since January. Not surprisingly, ADA trades below its 50 DMA (28 cents) and 200 DMA (33 cents).
One bit of good news is that ADA trades just above horizontal support, which lies at about 24.5 cents. However, the bulls need to show some resilience here. The additional downside could erode what little confidence remains in Cardano, making it one of the riskiest cryptos.
Another promising name among cryptos that has turned into a nightmare, Solana (SOL-USD) once held promise as an Ethereum killer. Basically, the underlying blockchain technology promised to facilitate the functionalities of the ETH network but with key improvements; notably, greater scalability and far lower transactional costs or fees. Then, in 2022 the rise of interest rates happened and SOL has not looked the same since.
In the past 24 hours, SOL dipped about a third of a percent. In the trailing one-week period, the token gave up 5.5% of its market value. Worryingly, Solana – which trades hands at $18.21 at the time of writing – sits conspicuously below its 200 DMA ($21.08) and its 50 DMA ($21.97).
Even worse, the price action is hanging in no-man’s-land. Looking at the chart, an investor can visually spot a horizontal support line at approximately $21. Dropping below this point will almost surely attract the bears. Sadly, similar to other virtual currencies, volume faded considerably in recent weeks. Without much interest, investors may want to head to the sidelines.
While some might erroneously view Dogecoin (DOGE-USD) as a scam, it continues to defy gravity. Thanks to its loyal army of advocates, one can never really count out DOGE. Just when you think the meme coin suffered a fatal blow, it jumps right back into the discussion. It’s basically the Fast and Furious franchise of cryptos.
However, rabid retail support can only go so far. While Dogecoin gained about half a percent in the trailing 24 hours, it fell almost 3% in the trailing seven days. Still, the good news is that with a market cap of nearly $8.7 billion, it ranks number seven in terms of the most valuable blockchain assets.
Overall, though, there’s little to celebrate about Dogecoin. For one thing, the volume level in September has fallen down to bare bones. This dynamic reflects a broader lack of interest, akin to what we’re seeing in the blockchain mining stocks.
Second, DOGE at 6.1 cents trades noticeably below its 50 DMA (6.9 cents) and 200 DMA (7.3 cents). Amid rising skepticism, now might not be an ideal time to speculate on cryptos, especially the riskiest examples.
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.