Undeniably, the cryptocurrency space has captured the imagination of mainstream investors and that could bode well for myriad individual cryptos. Still, it’s important to realize that the fundamentals matter. For blockchain assets, that comes in the form of the Federal Reserve and its monetary policy decisions.
Many cryptos began printing red ink ahead of the Consumer Price Index (CPI) report. Of coures, that’s one of the most important data points that the Fed will consider regarding its interest rate decision. Per Yahoo Finance, analysts expected the report to show headline inflation of 3.1%, while the actual print came in slightly higher at 3.2%.
Not surprisingly, cryptos incurred a noticeable hit to their valuation. Essentially, the Fed has less reason to lower the benchmark interest rate quickly, especially with shelter costs stubbornly elevated.
To be fair, virtual currencies are currently attempting a comeback. However, as the market digests the latest news, investors should adopt a more cautious tone regarding cryptos.
Bitcoin (BTC-USD)
Obviously, as the benchmark blockchain asset, Bitcoin (BTC-USD) garners the most attention when it comes to cryptos. However, BTC has really gone ballistic, reasserting itself as a top-tier investment of any category. Earlier on Monday, Bitcoin flirted with the $73,000 level, using data from CoinMarketCap. However, in early morning Tuesday, BTC struggled to hold the $72,000 level and now, even 71K seems a bit shaky.
Now, there are two schools of thought here under the technical analysis discipline. Using a point-and-figure (P&F) chart, it appears that Bitcoin has printed an ascending triple top breakout pattern. Potentially, this is a sign of incredibly robust bullishness, marked by a consistent pushing of demand to key milestone levels.
On the other hand, the immediate sentiment appears weak. Imagine a boxer that has advanced into the final rounds of a matchup. He’s still swinging but his legs are a little shaky and his punches are slower and less crisp. They’re also not landing as effectively.
Fading volume levels also suggest that a breather may be coming. Just watch this space carefully.
Ethereum (ETH-USD)
As the seemingly perpetual number two crypto by market capitalization, Ethereum (ETH-USD) invariably receives a ton of the spotlight. Over the past 24 hours since Tuesday early morning, ETH gained about 1%, helping it to tenuously hold the $4,000 milestone. In the trailing seven days, the digital currency is up around 9%, slightly outpacing Bitcoin over the same period.
Again, as with BTC, there are two schools of thought. First, Ethereum’s P&F chart shows a similar ascending triple top breakout pattern. This implies significant demand that’s accelerating above available supply. Supposedly, then, the price of the decentralized asset could move higher still.
On the other hand, acquisition volume levels have been fading as the price has been rising. Ordinarily, you want rising volume to confirm a rising price action. That’s not to say that Ethereum is guaranteed to correct. However, it wouldn’t be surprising to see near-term volatility in ETH and other major cryptos.
Referring to Barchart’s Trader’s Cheat Sheet, the bulls will need to break resistance near the $4,100 level. Otherwise, a slip down to around $3,920 isn’t out of the picture.
Tether (USDT-USD)
As a stablecoin, Tether (USDT-USD) enables convenient exposure to cryptos because it’s pegged on a one-to-one basis with the dollar. So, whenever an opportunity materializes in a digital asset, Tether holders can respond immediately. Otherwise, if they were holding dollars (or any other fiat currency), they would have to convert that money into a crypto format, which could be incredibly time consuming.
Still, Tether is more than just a mechanism for providing liquidity for the blockchain machinery. Fundamentally, the fluctuations of USDT can provide clues as to the sentiment of the overall market. Throughout this past week, Tether largely traded above its peg to the greenback; basically, the stablecoin has been worth more than the dollar.
That makes sense given the intense interest in cryptos recently. However, between Monday night and early Tuesday morning, Tether has occasionally dipped below its dollar peg. I don’t necessarily view this as a serious long-term concern. However, this price action may signal some corrective behaviors in the near term.
Solana (SOL-USD)
Although it might not look like it due to the rankings, Solana (SOL-USD) has been one of the more impressive cryptos this week. Yes, it lost the market cap race to BNB (BNB-USD), which took the number four slot behind Tether. Still, investors will be encouraged by the 1.5% lift over the past 24 hours. That’s better than many other major cryptos.
Also, Solana gained more almost 13% of market value in the trailing one week. Even better, the Monday and early Tuesday sessions are characterized by strong upside movements following some sideways consolidation over the weekend.
In terms of SOL’s P&F chart, the blockchain asset recorded a double top breakout pattern. This implies continued momentum could be in order. However, in terms of risk, it’s worth pointing out that volume is not confirming the rising price action. Therefore, don’t be surprised to see some sideways consolidation.
Looking ahead, bullish investors will be targeting the $155 level. Ultimately, $164 is where the strongest resistance lies. However, failure to spark positive momentum could see SOL correct near term to around the $143 line.
XRP (XRP-USD)
One of the stars of the show, XRP (XRP-USD) initially benefited handsomely from the intense demand in cryptos. Over the past 24 hours since early Tuesday, the coin – which has attracted controversy in recent years – gained about 12% of market value before incurring a 6% loss. Still, for the trailing week, it’s up almost 12%.
Technically speaking, throughout much of this year, XRP’s 50-day moving average represented upside resistance. On the few times when it broke above this running average, the 200 DMA acted as an extra defender, knocking down the bulls. On Monday, the optimists clearly had had enough, sending XRP shooting up to almost 75 cents before consolidating some of the gains.
Adding to the credibility, volume was also very robust on Monday. In fact, it printed the highest level seen this year so far. Looking at XRP’s P&F chart, a return to 75 cents seems plausible. From there, the next logical target would be 88 cents.
From Barchart’s cheat sheet, a large magnitude of resistance may lie at 93 cents. However, if XRP crosses this threshold, speculators could be off to the races.
Cardano (ADA-USD)
As one of the first altcoins or alternative cryptos, Cardano (ADA-USD) has long attracted a loyal investor base. However, ADA has printed one of the weaker performances in the decentralized asset market this week. In the past 24 hours since early Tuesday, it only gained about 1% before taking a 4% loss. However, in the trailing week, it’s up 2%.
So, what happened? It appears that the bulls are consolidating their gains following a strong run in the blockchain asset between late February to early this month. Two plausible actions may materialize moving forward. First, Cardano could be in the middle of printing a bullish flag formation. If so, that would imply a significant upside movement.
On the other hand, volume trends have been declining in recent sessions – a not uncommon trait among cryptos. Therefore, it’s possible to see downside.
Referring to Barchart’s cheat sheet, significant support lies around 71 cents to 72 cents. On the optimistic front, bullish traders will be targeting 80 cents, with a longer-term outlook to take out 89 cents.
Avalanche (AVAX-USD)
One of the strongest performers among altcoins lately, Avalanche (AVAX-USD) enjoyed a lift of approximately 18% over the past 24 hours. That’s well above many other major cryptos during the same period. In addition, it scored a return of 36% in the trailing seven days.
On an encouraging note, Monday’s trade resulted in a strong “candlestick” pattern. However, the early Tuesday morning session has been choppy. Obviously, crypto investors globally were turning their eyes to the U.S. with the aforementioned inflation report. One of the encouraging notes is that initially, the report sank AVAX. However, it quickly stormed higher.
Notably, Avalanche’s P&F chart shows a double top breakout pattern. Again, this implies demand outpacing supply, which should be good for a sustained rally. We’ll see if any of the bulls get cold feet considering the underperformance of other cryptos.
Turning to Barchart’s cheat sheet, investors will be looking for support to hold at $46.34. Failing that, the next level of support lies at $45.77. On the upside, the bulls will now be targeting the $60 level after blowing through resistance caked in between $50 and $54.50.
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.
