No matter what your take on cryptocurrencies, chances are, you may be on the camp that anticipates further corrections ahead. For one thing, such an outcome follows the organic progressions of the natural world. Waves rise and they fall, much like cryptos or any other publicly traded asset. Nothing in the capital markets is perfectly linear, and it may never be.
Second, while several assets stormed higher, few did so with the bombastic enthusiasm of cryptos. Don’t get me wrong — I genuinely believe the underlying blockchain technology is remarkable. However, we’ve been inundated with thousands of decentralized networks, each seemingly proposing to change the world in some manner. With the total virtual currency count approaching the 17,000 mark (at least among those tracked by CoinMarketCap), they can’t all be gamechangers.
However, not every bit of news surrounding cryptos has been negative. Recently, Cointelegraph mentioned several analysts who believe a short squeeze in the futures market is imminent. Essentially, with popular sentiment implying that digital assets will fall further, the bears piling into the negative trade may find themselves panicking out of their positions at the arrival of a surprise uptick in cryptos.
Other indicators extracted from the technical analysis discipline suggest that trading sentiment is excessively oversold for benchmark cryptos; we’re talking about multi-year lows. Therefore, it’s not unreasonable for investors — even perhaps casual observers who regret not getting in on the action last year — to consider the weak print as a long-term discounted opportunity.
When it comes to virtual currencies, all things are possible. Still, I’m getting skeptical about the incessant demand for everything blockchain related. For instance, the big banks that were previously harsh critics of the asset class are now embracing it.
Is that good news for the sector? You’ll have to decide for yourself as we monitor these seven cryptos:
Ultimately, the best idea I can give you is to consider a variety of analyses. Frankly, some of the leading thought leaders for cryptos are akin to asking a used-car salesman whether the car he’s selling is reliable. Do you think he’s going to say it’s junk and direct you to a more reputable dealer? No, and this level of skepticism is how you should approach anyone trying to part you with your money.
Cryptos to Watch: Bitcoin (BTC)
Like a football coach telling the defense to turn momentum back onto the positive side of their ledger, Bitcoin is making a noteworthy comeback effort following a series of rough trades. The newfound bullishness couldn’t have come at a better time. InvestorPlace assistant news writer Eddie Pan noted that recently, BTC briefly slipped below the critical $40,000 level.
Typically (and frustratingly, I might add), nothing wakes up the bulls in the cryptos space quite like dangling precariously on a tight rope. Right now, Bitcoin is edging its way above the $43,000 level, representing about a 9.5% lift from its sub-$40,000 dip. No doubt, both bulls and casual observers will take this swing higher as the signal to push the line forward.
However, I think it’s also to point out that despite the sizable rally, Bitcoin is down nearly 13% on a trailing-month basis. Ideally, investors will want to see BTC settle in around the $48,000 level to enjoy higher reassurances (though no guarantees) of a recovery rally. For now, close monitoring appears the sensible idea.
Over the trailing year, we’ve been hearing talk about a few select utilitarian cryptos becoming an Ethereum killer. As you know, the ETH network basically represents the backbone of multiple blockchain-based transactions. However, as the community surged in popularity, transaction fees within the network (called gas) skyrocketed. That has inspired developers to seek an Ethereum-like alternative but with greater efficiency, scalability and security.
Though multiple cryptos have jumped through the ranks to become the heir apparent to Ethereum, I don’t believe stakeholders necessarily need to worry about ETH being “killed” anytime soon. Sure, there are quite a few rumblings about the high gas fees. Nevertheless, the market capitalization between ETH and the next biggest digital asset is almost a 5X differential.
In other words, Ethereum commands a market cachet that’s going to be difficult to usurp.
Still, that alone doesn’t exempt ETH from the fallout. Arguably, Ethereum suffered the most pronounced correction across recent sessions, briefly dipping below $3,000. That’s significant since ETH has been holding on or near the $4,000 level for some time. Vigilance and caution is key right now.
Cryptos to Watch: Tether (USDT)
With the broader fallout in the cryptos space since approximately mid-November of last year, stablecoins — particularly Tether — are having their moment. In the last couple days, Tether briefly became the third-most valuable digital asset by market cap, though it has moved back down to fourth.
The beauty of USDT is that — at least on paper — it’s pegged to the dollar and therefore, redeemable on a one-to-one ratio. True, a pegging is rather boring when you’re talking about the wild gains possible in cryptos until you consider the wider implications. By converting assets like BTC and ETH into Tether tokens prior to a major market correction, you essentially have digital cash while staying within the crypto realm.
This circumstance allows you to deploy that cash whenever an opportunity pops up. In contrast, shifting large amounts of fiat currency from the traditional banking system to your crypto wallet may be cumbersome and time consuming. As well, such transactions are likely to alert unwanted attention.
Still, with USDT being so highly valued, you should really think about the risks; namely, Tether might not have the backing it claims it does.
Solana has been quite the firecracker among cryptos in the last day, gaining about 7% over the trailing 24-hour period. More importantly, SOL has been climbing up the ranks, securing fifth place in terms of market cap. While the “promotion” is precarious — the differential is only about 6% — the move still demonstrates the power of its community.
As mentioned earlier, Solana could join the ranks of other cryptos vying for Ethereum killer honors. It’s a mighty quick blockchain network and has the potential to scale significantly. Indeed, many developers have transitioned from ETH-backed applications to the SOL counterpart, attracted no doubt by smaller transaction fees.
Of course, there are other technical advantages to adopting Solana. However, more than one report has mentioned brewing security concerns related to the SOL network, particularly related to distributed denial-of-service attacks. Such circumstances point to a challenging road ahead for those networks competing for Ethereum’s crown.
Further, while the latest bump higher in SOL is encouraging, it’s got a long ways to go. I wouldn’t get too excited until SOL convincingly secures the $170 level.
Cryptos to Watch: Cardano (ADA)
Recently, I suggested that Cardano trading below the $1.20 level is akin to playing with fire. I used this threshold not only because of its psychologically appealing profile, it has more importantly represented a springboard to much higher prices, such as its late-April 2021 rally and subsequent late July rally. Therefore, in my view, extended sessions below $1.20 signals trouble.
Well, after briefly falling below the $1.10 level, Cardano has bounced back and in the past day has jumped past the $1.20 barrier, now closer to $1.30. Longer term, ADA might be a bargain at the present price. My point is that bullish proponent of cryptos might be able to secure a much better discount by waiting.
Further, it might not be a bad idea for those who happen to be profitable in Cardano to take some (but not all) profits off the table. True, anything can happen in this arena. But to be blunt, after losing so much from a valuation perspective, benchmark cryptos like Bitcoin and Ethereum should be rallying like bonkers.
As such, I would adopt a cautionary approach with ADA.
The meme coin that started the grassroots revolution in cryptos, Dogecoin is now part of the mainstream consciousness thanks to the support of living legends like Elon Musk. It’s also a fascinating topic regarding the sociology of the capital markets. While its proponents will argue that DOGE is undergirded by a utilitarian blockchain and a burgeoning economic ecosystem, arguably its main claim to fame is as a social-media-driven phenomenon.
People love Dogecoin because they love Dogecoin — and Shiba Inu dogs. On the surface, it doesn’t sound like much of a thesis, considering that there are so many other cryptos to choose from. Nevertheless, from fractions of a penny to the verge of breaking into one-dollar territory, DOGE has taken us all on a journey. I think we can at least give it credit for that.
However, as a vehicle for profitability, the meme coin is starting to lose its charm. Ever since the coin charted a head-and-shoulders looking pattern between April to June last year, DOGE has struggled to generate positive momentum. Unless gambling is your thing, I’d probably just wait for a discount in high-quality cryptos.
Cryptos to Watch: Decentraland (MANA)
Over the last few weeks, I’ve discussed in detail my thoughts about Decentraland and the concept of digital real estate. If you’ve followed these articles, you’ll know my position: I think the idea is absurd. That’s not to say that I’m deliberately seeking to upset proponents of MANA and virtual property.
Whatever floats your boat. As for me, I don’t think I can ever justify spending more than a couple hundred bucks of speculation funds on digital land.
I might attract negative attention for saying this, but the technical charts suggest more people might join me on this side of the debate. Between late October 2021 to early January of this year, MANA printed a head-and-shoulders pattern that looks very similar to the pattern Dogecoin printed. As mentioned above, we all know what happened next for the meme coin.
Could Decentraland suffer the same fate? Of course, with the unpredictability of cryptos, I’m not about to recommend a short position on MANA. But these heads-and-shoulder patterns have proven ominously accurate for other digital assets. I’m sorry, but I am very skeptical about MANA. It would not surprise me in the least if it suffered severe losses from here on out.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, ADA, DOGE and MANA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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