After much anticipation and drama, the world turned to cryptos to watch as the blockchain industry finally got a spot-virtual currency exchange-traded fund (ETF) on the map. Last week, the U.S. Securities and Exchange Commission (SEC) approved applications from multiple investment firms. Admittedly, after an initial bout of enthusiasm, the sector corrected sharply. Nevertheless, I believe the cat’s out of the bag.
With a new mechanism of crypto participation available to mainstream investors, the old money should start flowing in. Why? Simply put, the suits of Wall Street know that their time is up. With the all-digital Generation Z gravitating toward cryptocurrency assets, it may be a matter of inevitability. Since the decentralized ecosystem represents where the money will go, it makes sense to position oneself early.
Plus, you have to figure that as Gen Z enters the workforce every year, this cohort’s purchasing power will only increase. When it does, that money will increasingly be earmarked for cryptos to watch. Whether you like it or not, it doesn’t matter – that’s reality.
On that note, below are the digital assets to watch closely this week.
Bitcoin (BTC-USD)
At first glance, Bitcoin (BTC-USD) seems problematic. In the past seven days, BTC gave up almost 9% of its market value. In attempting to make up for the heavy loss, the benchmark among all cryptos to watch only gained less than 1% in the past 24 hours. That’s not the most encouraging development. Still, as a recent CNBC report pointed out, the floodgates may soon open.
With the approval of spot Bitcoin ETFs, analysts at Standard Chartered believe that fund inflows will range between $50 billion to $100 billion this year. In my opinion, that’s a very reasonable estimate. For the first time, mainstream investors enjoy easy access to cryptos. And the ETF format – which is identical to buying stocks – offers a level of comfort to traditionalists.
With an ETF, investors don’t have to worry about losing or forgetting passwords or other administrative nightmares unique to cryptos. Instead, they can focus on the broader narrative of virtual currencies. With the convenience factor amplified, the recent red ink in Bitcoin may be a discounted opportunity.
Ethereum (ETH-USD)
While Ethereum (ETH-USD) tends to ride coattails on whatever catalysts bolster Bitcoin, regarding an ETF-fueled rally, that may be all Ethereum could be doing for some time. According to analysts at TD Cowen, chances are slim that the SEC will greenlight a spot Ethereum ETF shortly. “The wait might not be as long as 26 months, but it likely would be after the election,” the investment bank said.
That makes sense if you consider the distinct challenges associated with an Ethereum ETF. It’s not just a matter of bringing cryptos to the mainstream, which will encounter criticism or at least skepticism. Rather, the ETH network now utilizes a proof-of-stake (PoS) blockchain validation mechanism compared to the original proof-of-work (PoW) protocol. Generally, PoW tends to be meritocratic (emphasizing raw computer power) whereas PoS tends to be “aristocratic.”
We’re seeing problems right now where the staking protocol inherently rewards early adopters, potentially leading to a centralization dilemma. How an ETF would address this dynamic will be interesting.
Nevertheless, from an investment perspective, ETH offers intrigue as more mainstream institutions will be moving into cryptos. Thus, it may be a buy.
Tether (USDT-USD)
Given the red ink that Bitcoin printed following its ETF approval victory, it’s not surprising that Tether (USDT-USD) suffered some “volatility.” To be clear, volatility among stablecoins usually means something very different than wild gyrations in a “standard” crypto like Bitcoin or Ethereum. Being pegged to the dollar on a one-to-one basis, Tether facilitates conveniences and liquidity for the broader virtual currency ecosystem.
That said, when USDT falls below its peg – meaning that you can buy more Tethers than the equivalent amount of dollars spent (assuming no transactional and administrative fees) – it may raise eyebrows. Basically, such a scenario communicates that demand for fiat currencies runs higher than virtual currencies. Indeed, TipRanks’ blockchain analysis suggests sentiment at the moment is “mostly bearish.”
Notably, net network growth and large transactions were both lower than historical norms. Also, large USDT holders reduced their exposure to the stablecoin by 0.81%. That’s due to the sell-the-rumor dynamic associated with Bitcoin ETFs.
Moving forward, investors may want to keep an eye on the Tether-dollar peg. If it starts moving back toward parity, sentiment for cryptos could rebound.
Solana (SOL-USD)
When it comes to cryptos to watch that could really benefit from the broader interest in decentralized digital assets, it’s hard not to get a bit excited about Solana (SOL-USD). Yeah, it already saw a substantial rise starting from the Uptober seasonal phenomenon. However, we’re talking about a virtual currency that was moving toward the $300 level during the peak of 2021. Relatively speaking, it may still have some legs left.
From a psychological standpoint, Solana offers a tempting package. First, you have the price. At just under $100, it’s expensive enough to draw credibility. However, it’s also cheap enough to draw in people who may be balking at the per-unit price tag of Bitcoin and Ethereum. Further, Solana competes with Ethereum on the functionality spectrum, with advocates arguing that it’s a superior platform for blockchain development.
Right now, Solana firmly holds the number five spot in terms of market capitalization at about $41.45 billion. And with a few strong moves, SOL could promote itself to fourth place. Given that so many folks are interested in virtual currencies, I’d give this one a long look.
Avalanche (AVAX-USD)
If you’re looking for a high-risk, high-reward alternative to Ethereum, Avalanche (AVAX-USD) should be on your radar. Fundamentally, the underlying network benefits from low transaction fees. Even better, the low-fee profile carries over during peak usage cycles, making it much more palatable for developers. Also, users benefit from Avalanche’s scalable architecture and efficient fee structure.
In some ways, AVAX may see dynamics similar to the electric vehicle market. Back during the dawn of the EV industry, consumers were more than willing to put up with quality control issues such as panel gaps for the chance to participate in the burgeoning mobility paradigm. However, as more competitors enter the space, consumer expectations should rise. That’s going to put some pressure on early adopters (I’m not naming names).
Similarly, it’s quite possible that blockchain developers will not be willing to put up with certain costs and inconveniences amid rising alternatives. That could benefit AVAX in the long run. However, in the near term, AVAX’s struggles right at its 50-day moving average presents concerns.
Frankly, I’d probably wait a week or two before making a big purchasing decision.
Cosmos (ATOM-USD)
For those who want to speculate on cryptos to watch, Cosmos (ATOM-USD) delivers a mix of intriguing fundamentals and a technical posture possibly poised for robust growth. Per Coinmarketcap, Cosmos is a project that seeks to solve some of the “hardest problems” impacting the blockchain industry. Specifically, the network takes aim at PoW protocols that Bitcoin forwarded.
Providing an antidote to “slow, expensive, unscalable and environmentally harmful” PoW protocols, Cosmos instead offers an ecosystem of connected blockchains. In addition – and this is where I’m particularly interested – Cosmos is attempting to make the underlying decentralized technology less complex and difficult for developers. It seeks to accomplish this ambitious goal via its modular framework.
Now, it’s difficult to say whether these attributes will resonate with crypto speculators. However, since Uptober, ATOM soared from single-digit territory to around $12. At time of writing, the coin slipped to around $10.44. Even more enticing, the digital asset popped over $40 at its peak.
Given the relative discount and the lack of eyeballs (compared to the majors), ATOM may be a tempting wager.
Uniswap (UNI)
Finally, for speculators just getting exposed to cryptos to watch, Uniswap (UNI-USD) might be an enticing upside prospect. Just to be clear, you’re going to have to accept some serious risks. Ranked at number 21 in terms of market cap, it’s popular enough to attract some eyeballs. However, according to TipRanks, its correlation coefficient with Bitcoin sits at 0.14 below parity. In other words, it does not correlate with Bitcoin.
That could be a good thing or bad thing – it really depends on what you’re looking for. Fundamentally, Uniswap garners much popularity because of its decentralized trading protocol. It’s best known for facilitating automated trading of decentralized finance (DeFi) tokens, per Coinmarketcap. Therefore, it tends to march to its own beat, contributing to the aforementioned lack of correlation.
Now, what raises eyebrows – in a good way – is UNI’s recent momentum. In the past 24 hours, it gained over 3%. And in the trailing one-week period, it’s up nearly 11%. At its peak, Uniswap achieved a per-unit price exceeding $40. Now trading hands at less than $7, UNI could be due for a breakout.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH and USDT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
