While some blockchain advocates have supported the notion that cryptos are the new generation’s safe-haven assets, this hypothesis is suffering a major challenge. With geopolitical tensions soaring in the Middle East, it’s actually gold that has benefited from the fear trade.
On Saturday, Iran launched over 300 drones and missiles toward Israel, claiming that it was retaliation for the April 1 bombing of its embassy in Syria. Iran blames Israel for the attack. Subsequently, Israel’s military chief stated on Monday that his country will respond to the drone and missile launch. That has left many investors uneasy about what that response may entail.
One area of concern focuses on the energy market. Should tensions escalate, global oil supplies could be disrupted, which is natively inflationary. Theoretically, this dynamic should help cryptos. However, gold has been the decisive winner so far.
You never want to count out the virtual currency sector. However, it may be best to lead with the data. Here are the cryptos to watch.
Bitcoin (BTC-USD)
With Bitcoin (BTC-USD), we have a very simple proposition. It needs to rise higher immediately. What started off as the formation of a bullish pennant has now deformed into an ugly setup. Current, the price action is conspicuously below its 50-day moving average, which comes in at around $67,100. On Monday evening, BTC trades hands at below $64,000.
Another problematic situation is the low volume. That has been a consistent theme since late February to early March, when Bitcoin gathered steam to a record valuation. However, the current volume is moribund compared to recent sessions, presenting downside concerns. Obviously, from a psychological standpoint, maintaining the $60,000 level will be crucial.
On a fundamental note, what worries me is CoinDesk’s latest article, which shows that the whales (or large crypto players) have yet to resume mass-scale accumulation. It’s up to the retail investors to save this rally. Unfortunately, they may lack the funds and/or conviction to swing the needle forward. Therefore, investors need to be cautious with BTC, which could have downwind implications for other cryptos.
Ethereum (ETH-USD)
As the seemingly perennial number two among cryptos, Ethereum (ETH-USD) generally closely tracks the Bitcoin price. Obviously, that’s not a great situation right now. With geopolitical tensions rising in many parts of the world, the global economy looks less stable. From this angle, it may not be that surprising that ETH took a hit.
Yes, the limited historical data that’s available suggests that cryptos demonstrate some qualities tied to safe-haven investments. However, the problem is that many blockchain assets have become quite pricey. In other words, you need to pay to play. And if you want to pay, you have to have a job (if you’re not already independently wealthy).
In terms of price action, Ethereum resembles Bitcoin but even uglier. On Friday, when rumors started sprouting that Iran was ready to respond to its embassy attack, ETH dropped sharply below its 50 DMA. With the missiles flying, sentiment has become even uglier.
If Ethereum doesn’t pop back up immediately, the technical damage invites a trip below the $3,000 level.
Tether (USDT-USD)
Occupying the number three slot in terms of market capitalization is Tether (USDT-USD), which is a stablecoin. Pegged on a one-to-one basis with the dollar, Tether’s main function is to effectively provide liquidity. Unlike other cryptos, it’s typically not traded as a direct means to extract capital gains. Rather, it can hold wealth in crypto terms, enabling traders to respond to decentralized opportunities immediately.
Interestingly, for the trailing one-week period, USDT has largely stayed at or above the 1:1 threshold. However, last Friday as tensions ratcheted up, Tether did fall below the peg. Stated differently, the dollar was worth more than its unit equivalent in USDT terms. However, on the day of Iran’s attack, the stablecoin shot up to a peak of $1.0025.
It’s possible that traders could have responded to reports that Israel successfully shot down most of the missiles and drones fired at it. However, it’s also notable that USDT has begun fading in Monday trading, likely in fear of Israel’s response. Again, this dynamic emphasizes the caution needed for cryptos right now.
BNB (BNB-USD)
While BNB (BNB-USD) has put up an impressive performance since February of this year, its price action mimics Bitcoin. Prior to the tensions in the Middle East, that was a positive development. BNB appeared to print a bullish pennant formation, which implied a continuation pattern. However, the geopolitical crisis has sunk the price, making the chart look ugly.
Now, one positive element that BNB has relative to Bitcoin and some other cryptos is it’s priced above its 50 DMA. However, the bulls need to support the digital asset quickly. For me, what’s worrisome is the fading volume. On Monday, it’s down in the abyss, which is simply not normal. If support doesn’t come soon, I wouldn’t be surprised to see the bears take the price down to $430.
Looking at Barchart’s Trader’s Cheat Sheet, the next major support line is near $538. Failing that, there are three layers of support in the $500 range. At a minimum, the bulls need to find a way to keep BNB above $500.
Solana (SOL-USD)
One of the most popular virtual currencies, Solana (SOL-USD) has lost a significant among of momentum. Over the past seven days, SOL lost almost 24% of market value. That’s one of the worst performances among cryptos listed in the top 10 by market cap. Technically, the challenge with Solana is that its price action has become extremely unattractive.
It’s imperative for the bulls to restore order. On Friday, SOL saw volatility which plunged the digital asset below its 50 DMA. With tensions turning into a hot escalation, Solana became even more volatile. In the afternoon hours, the crypto has somewhat stabilized. However, stabilization is not enough – it must move higher or risk a significant near-term correction.
Looking at Barchart’s Trader’s Cheat Sheet, the next level of support is $130. Failing that, there are three lines of support before the bulls have a line in the sand at $106.34. This level must hold. Otherwise, the damage would be inviting a drop into double-digit territory.
Toncoin (TON-USD)
A new entry into the top 10, Toncoin (TON-USD) is currently ranked at number nine. That’s an impressive performance, particularly since it started trading in August 2021. According to CoinMarketCap, Toncoin represents a decentralized layer-1 blockchain that originally started as an effort to launch an intuitive app that allows users to buy, send and store digital funds.
Conspicuously, Toncoin happens to be the best-performing digital asset under certain contexts. Over the past week, TON gained a bit more than 1%. Only one other asset comes close. Still, that also goes to show you the devastation that has impacted cryptos because of the geopolitical crisis. Moreover, Toncoin isn’t exempt from a sense of urgency. It really needs to pick up the pace.
Like other virtual currencies, TON fell badly on Friday, sending its price below its 50 DMA. When the missiles started flying on Saturday, the crypto sank below its 200 DMA. Currently, it’s trying to move back up this moving average.
If it fails to restore positive momentum, Toncoin would invite the bears to take it down to the $1.50 level.
Cardano (ADA-USD)
One of the hardest-hit assets among cryptos also happens to be one of the most popular. In the past seven days, Cardano (ADA-USD) suffered a decline of almost 25% of market value. In the trailing 24 hours, it dipped more than 1%, demonstrating an utter lack of positive momentum. Needless to say, with an ugly chart and badly fading volume, the bulls need to come in to rescue it.
Any bolstering must happen soon. On Friday, geopolitical tensions saw Cardano plunge to near its 200 DMA. When the actual attack occurred, the digital asset fell decisively below the benchmark. A few attempts have been made to get back above this level. However, they’ve failed, leading to serious questions about forward viability.
There’s no getting around the point that Cardano has printed an ugly chart. From Barchart’s Trader’s Cheat Sheet, there are only a few support lines available before ADA finds itself below 40 cents. It really needs to be at 60 cents. Unfortunately, a stack of resistance barriers awaits the bulls. Therefore, investors may want to wait for clarity.
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.
