Although the cryptocurrency sector saw some encouraging developments, the latest economic news also served to rattle investors. As a result, it’s difficult to decipher the next movements of major cryptos. Basically, the threat of monetary policy intervention has weighed on technical sentiment.
On the positive side of the spectrum, a CoinDesk article detailed that virtual-currency-related investment products absorbed nearly $2 billion of inflows last week. With this performance, the action extends a five-week run to over $4.3 billion, per asset manager CoinShares. Further, trading volumes in exchange-traded coins and tokens jumped to $12.8 billion for the week, representing an increase of 55% from a week prior.
At face value, these events sound encouraging for cryptos and they are. So, why did the benchmark blockchain asset stumble below the critical $70,000 level? Fundamentally, the digital asset sector became volatile last Friday, coinciding with the robust U.S. non-farm payrolls data. With the labor market being stronger than expected, this raises the specter of hawkish intervention.
That might be a problem for risk-on assets, particularly virtual currencies. On that note, below are cryptos to watch closely this week.
Bitcoin (BTC)
Obviously the most-tracked cryptocurrency of them all, Bitcoin (BTC-USD) led the sector lower early Tuesday morning. Over the past 24 hours, BTC slipped almost 2%. On paper, the benchmark digital asset only lost 1% over the trailing seven days. However, at an open-market price of $68,400, the coin slipped below key psychological levels.
By logical deduction, the top priority for the bulls is to regain and restore credibility at $70,000. Generally, humans like easy whole numbers and 70K is a nice resting spot for 80K. By that point, investors will be enthused to hit the mythical six-digit price target. It’s possible that Bitcoin can get there, provided that the current consolidation pattern is resolved in the form of a rounding bottom formation.
However, some concerns exist. First, acquisition volume in May and June has been weak relative to what we’ve seen in late February and early March. Another challenge is that the current volatility has BTC trading below its 20-day exponential moving average (EMA). If this level doesn’t hold, Bitcoin’s 50-day moving average awaits at just under $66,000.
Falling to that point would hurt credibility. Thus, BTC needs a big move here.
Ethereum (ETH)
The number two cryptocurrency by market capitalization, Ethereum (ETH-USD) absorbed a far greater deal of volatility than its mainline counterpart. In the past 24 hours, ETH slipped roughly 3%. Over the trailing seven days, the popular virtual currency fell nearly 5%. It may be more critical for the bulls to “save” ETH than some other cryptos.
One factor that made Ethereum distinct — if not outright unique — was its super-tall bullish candlestick during the May 20 session. That saw the crypto coin jump from an “opening” price of about $3,071 to a “closing” price of roughly $3,662. Subsequent sessions attempted to march ETH higher but with relatively muted success. When the jobs report came out, the blockchain asset tumbled.
With ETH’s current volatility, the bears drove the price just below the $3,600 level. Significantly, the negative action saw the number-two coin dip conspicuously below its 20-day EMA. It risks falling to its 50 DMA, which sits at $3,381.
It’s possible that Ethereum could be in the middle of forming a crooked rounding-bottom pattern. Still, with acquisition volume fading over the past few weeks, ETH needs to move up quickly.
Tether (USDT)
As the biggest stablecoin or digital asset pegged to a fiat currency, Tether (USDT-USD) doesn’t follow the traditional incentivization path of cryptos. In other words, people usually don’t bet on USDT because it will rise higher in value. Again, it’s pegged to a national currency, in this case the U.S. dollar. So, it mostly fulfills solutions related to liquidity.
That doesn’t mean Tether is useless as an analytical tool. On the contrary, USDT may provide important clues regarding the forward viability of non-stable-coin cryptos. Should USDT be worth more than its dollar peg, that would indicate greater confidence in the blockchain. On the other hand, if the coin falls below its peg to the greenback, that may suggest pensiveness: people would rather hold dollars than Tethers.
At the moment, USDT is trading hands around 99.94 cents to the dollar. Nominally, that doesn’t sound significant. However, data from CoinMarketCap reveals that in the trailing week, Tether spent much, if not most of its time below its one-to-one peg with the greenback.
That’s not necessarily a sign to panic. However, it’s interesting that investors would rather hold dollars than cryptos. It’s just something to keep in mind this week.
BNB (BNB)
One of the more intriguing cryptos recently, BNB (BNB-USD) took it on the chin relative to major blockchain assets. In the past 24 hours, BNB slipped almost 7%. During the past week, it lost almost 2% of market value. At present, the coin’s market cap comes in at just under $92 billion. This puts a sizable gap between it and the fifth-place digital asset.
Still, this gap might widen and not in favor of BNB. A major concern is that Binance — the exchange to which the aforementioned coin is tied — may be at risk of losing significant market share. That’s not the distraction the organization needs right now. Last month, Binance’s former CEO Changpeng Zhao was sentenced to prison for money laundering.
What’s interesting was that beginning on Jun. 3, the bulls attempted to drive BNB higher. It temporarily succeeded until the bears crashed the party, sending it back down. Still, the crypto coin is riding a bullish trend line that materialized in March of this year.
Moving forward, the bulls need to keep BNB above the 50 DMA, which stands around $606. Otherwise, circumstances could get ugly.
Solana (SOL)
Among the major cryptos, Solana (SOL-USD) arguably needs the biggest boost in the near term to prevent technical damage. As circumstances stand right now, SOL lost almost 3% of market value in the past 24 hours. Over the trailing one-week period, the blockchain asset incurred a 7% loss. After representing one of the most popular virtual currencies, Solana is now treading difficult waters.
On the Jun. 7 session when investors saw the May jobs report, fears of a hawkish intervention badly hurt sentiment. It wasn’t just about the implications of rising interest rates to combat inflation. Rather, on a technical level, SOL slipped below its 20-day EMA. Subsequent sessions saw the price action ride the 50 DMA, which acted as support.
Unfortunately, the latest bout of volatility has SOL sitting just below the 50 DMA. That’s problematic and the bulls need to restore credibility here. If they don’t, the 200 DMA beckons below, which sits at just under $128. Obviously, that’s not where Solana should go.
However, the rounding-bottom formation that may be in play needs to start developing soon. Otherwise, the fading acquisition volume since March of this year is distracting.
XRP (XRP)
I was hoping for some positive developments in XRP (XRP-USD). Unfortunately, that’s probably not going to happen, at least not in the near term. Over the past 24 hours, the digital asset that really needed a win incurred a loss of more than 2%. That’s not terrible per se. Unfortunately, during the past seven days, the somewhat controversial asset fell more than 6%.
Technically, XRP’s near-term troubles can be traced back to Apr. 12 and Apr. 13. During those sessions, two large red candlesticks emerged as the bears beat down the XRP price. Following Apr. 13, the bulls attempted with very limited success to restore credibility to the digital asset. However, both the 20-day EMA and the 50 DMA imposed upside resistance.
Right now, XRP trades hands around 49 cents per unit. Frankly, that’s moving the needle in the wrong direction. With so much technical damage done, it’s not clear how the bulls will respond.
Yes, you could make the argument that XRP is on a “discount.” However, the severely bearish reaction to the May jobs report impeded what little progress was made. I would tread very cautiously here.
Dogecoin (DOGE)
While other cryptos have demonstrated the possibility of a bullish pattern forming (i.e. the rounding bottom), Dogecoin (DOGE-USD) finds itself in quite the opposite situation. Basically, it’s in a race to avoid severe technical damage. In the past 24 hours, DOGE slipped more than 3%. During the trailing week, it plunged almost 11%. That makes it the worst performer so far among the major virtual currencies.
What makes Dogecoin problematic was that it was riding its 20-day EMA and 50 DMA as support lines. However, when the jobs report came out on Jun. 7, DOGE absolutely cratered. That might be because compared to other cryptos, Dogecoin is especially high risk. After all, many people regard the cryptocurrency as a meme coin.
To be fair, meme coins are unpredictable in both directions. Given the sentiments toward high-risk ventures in the stock market, it’s not impossible for Dogecoin to rise higher, just because. However, if there is to be an upswing, it needs to happen ASAP.
With DOGE slipping below the 20-day EMA and 50 DMA, it appears stuck in no-man’s-land.
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.
