7 Cryptos to Watch as Fears of Inflation and Omicron Pummel the Market

In early November, the cryptocurrency complex appeared on the verge of another mindboggling peak. But common sense began to trickle into the market, at least for the smart money.

Following a hefty dose of red ink, several cryptos began building a support line, possibly to chart another big rally. Unfortunately, Federal Reserve chair Jerome Powell had other ideas.

To be fair to the world’s most powerful central banker, he wasn’t operating on a whim — rather, working with the data on hand. Still, Powell’s words carry significant global influence and his admission of inflation concerns didn’t provide much encouragement for risk-on assets like cryptos. Instead, his stance on the surge of consumer prices — particularly everyday goods and energy — opens the door for an interest rate hike next year.

Indeed, Wall Street Journal indicates that rate hike could come as soon as the first six months of 2022, which would impose a damper on various upside price targets for cryptos. What’s particularly worrisome for digital assets is that, according to the Fed’s preferred gauge, inflation stood at 5% in October. Therefore, we may be moving away from talking about rate hikes and accepting them as an inevitability.

If that wasn’t bad enough for cryptos, at least in the near-to-intermediate term, the global community must contend with the omicron variant of the novel coronavirus. With several countries taking drastic travel-ban measures to buy themselves time against the ongoing public health crisis, the move — while arguably sensible — will likely hurt multiple economic initiatives. This too would be unfavorable for cryptos and other risk-on assets.

To be 100% fair, we don’t know much about the omicron variant. All I can say is that experts have expressed concerns about its contagiousness, although it possibly could result in largely mild symptoms. Again, no one knows yet what the profile is. Nevertheless, it’s best to be cognizant of the threat as we discuss the below cryptos.

Here are 7 cryptocurrencies to buy:

Moving forward in these next few months, vigilance is key. Although central banks responding to inflation could be a detriment to cryptos, keep in mind that money velocity is extremely low. With a possibly worsening economy due to the immediate response to the omicron variant, investors must also note that deflation is not out of the question.

Bitcoin (BTC-USD)

In roughly the first hour of stock market trading on Dec. 1, Bitcoin briefly breached the $59,000 level. However, as investors began to digest concerns about the omicron variant — along with other economic variables such as Black Friday sales — stocks absorbed a sizable retreat, at least in comparison to the heady days from earlier this year.

In turn, Bitcoin faltered, hitting a post-market open low of approximately $56,600 before sparking robust activity within a tight range averaging around $57,000. At time of writing, BTC-USD had just poked its head above the $57,000 level, perhaps indicating that some proponents of cryptos believe the omicron-related selloff was overdue.

That could well be the case. It’s worth reminding ourselves that this isn’t the first time international government agencies have expressed concern about a Covid-19 strain. Earlier this year, mainstream media headlines focused on the lambda variant, which near the time of discovery came with a familiar warning that it could be resistant to vaccines.

As far as I know, the media hasn’t much discussed lambda since, though that doesn’t necessarily mean it’s not a threat. And omicron could alternately be even worse than advertised. For now, Bitcoin is in a holding pattern, but it’s something to watch. It could be a useful leading indicator, considering that it trades 24/7/365.

Ethereum (ETH-USD)

While Bitcoin investors have expressed some concerns about the possibly worsening pandemic, Ethereum decided to move against the grain. The backbone to myriad blockchain networks, Ethereum has always attracted interest not only because it’s the second biggest crypto but also for its workhorse status. With the concept of decentralized transactions proven more than viable, blockchain advocates are now looking to mainstream the underlying technology.

That might be part of the reason why Ethereum shot higher while its peers notched ho-hum performances. According to a Benzinga article published on Nov. 30, over a 24-hour period, Bitcoin traded relatively flatwhile, Ethereum moved close to its all-time record high before a slight retreat.

Because of the inverse correlation between BTC-USD and ETH-USD, some blockchain market experts view that price action as a signal for an impending explosive rally in altcoins, which could occur in the first quarter of 2022. Others say that declining BTC-USD prices are actually part of a “falling wedge” formation that implies a significant move higher.

Feel free to trade as you see fit. But don’t ignore the possibility that underlying economic factors can turn against any and all cryptos.

Solana (SOL-USD)

While Bitcoin may have been stuck inside a tight consolidation range over the 24-hour period preceding the late evening of Nov. 30, Solana has enjoyed quite the opposite fortune. Up 10.5% during the aforementioned period, SOL-USD as of this particular frame is the best performer among Top 10 cryptos (ranked by market cap).

Of course, SOL-USD supporters will argue that this isn’t a mistake. One of the fascinating features of the broader blockchain industry is the way different protocols build on each other. As one project fosters an innovation, another expands upon the idea and so forth. With Solana, its primary contribution is its proof-of-history validation, which enables time-based transaction verification in addition to the standard activity-based verification checkpoint.

Long story short, Solana offers an added security measure to make blockchain-related functions truly permissionless, frictionless and trustless, while still promoting superior services relative to centralized counterparts. Personally, I think it’s a fascinating concept that improves the technical underpinnings of the blockchain.

Still, prospective investors will want to separate Solana’s functionality from SOL-USD’s price trajectory. The building of a better mousetrap has not always coincided with superior returns.

Cardano (ADA-USD)

In U.S. politics, we often talk about the separation of church and state, which means the government cannot sponsor nor endorse a particular faith. Individual citizens can apply their religious convictions in the public arena but the government itself does not conduct affairs under a religious directive.

We should have a similar thought process with cryptos, but with a separation of blockchain functionality and profitability. Cardano provided an excellent example of this dynamic during the year.

As the pioneer of the proof-of-stake protocol (a mining mechanism that rewards participation/contribution to the system as opposed to one that largely benefits raw computing power, as in proof of work), Cardano picked up considerable steam. Not too long ago, ADA-USD coins poked their head above the $3 barrier. At time of writing, they’re trading at $1.60 a pop.

If the Cardano project was so fundamentally groundbreaking, it’s hard to imagine that ADA-USD would lose nearly half of tis value over the trailing quarter. But that’s the thing — Cardano is fundamentally a really big deal.

Consider it an extra warning to be careful with cryptos. Sure, the underlying blockchain protocol may be awesome, but that won’t mean much if the rest of the investor community don’t agree.

Polkadot (DOT-USD)

Early this year, Polkadot commanded a bright spotlight — and perhaps some notoriety — as analysts began calling DOT-USD the Ethereum killer. Also known by a more agreeable nickname, the blockchain of blockchains, Polkadot is technically an open-source sharding multichain protocol.

Polkadot is a “next-generation blockchain and layer-0 protocol that unites multiple specialized blockchains into a unified, scalable network.” Further, the system “was designed as part of a broad vision for a fair, secure and resilient web that protects user interests by design (Web 3.0).”

In plain English, Web 3.0 represents the next evolution in internet connectivity, emphasizing attributes such as decentralization and transparency. Potentially, Polkadot could be a key contributor toward cohesive Web 3.0 infrastructure by facilitating cross-chain communications. That way, the power of the Internet remains in the hands of the people and not big corporations.

I appreciate these lofty goals, even if I question their viability.  Nevertheless, my biggest concern with DOT-USD is that the cryptocurrency is currently sandwiched between its 50-day moving average at the top and its 200 DMA below. I’d like to see more consistent positive sessions before taking a major position.

Dogecoin (DOGE-USD)

Initially, I viewed Dogecoin as nothing more than pure speculation. Sure, I bought some DOGE-USD back in the day when they were trading in the fractions of a penny. I never thought I’d see the day DOGE-USD became part of the everyday lexicon, thanks to mentions on mainstream platforms like Saturday Night Live.

But then, I realized that this is the same functionality versus profitability argument I mentioned earlier, on a different side of the spectrum. To put it another way, some investors make the mistake of putting too much emphasis on cute magic blockchain buzzwords (Decentralization! Democratization! Distribution!), without considering that investor sentiment might not even care about the technical nuances of the target network.

On the other end of the scale, some investors ignore speculative cryptos like Dogecoin simply because they lack professional decorum or a discernible technical advantage. But we have seen time and again this year how cryptos can trade divorced from their fundamentals.

I’m not making any guarantees, but Dogecoin could be building support for another wild ride in 2022. It’s certainly an obvious cryptocurrency to watch.

Crypto.com Coin (CRO-USD)

This is a bit self-serving.

Okay, it’s extremely self-serving, but I’m mentioning Crypto.com Coin because I genuinely believe that over the long run, CRO-USD could deliver strong gains. I try my best to practice what I preach and that’s what I’m doing with this token, having recently initiated a position.

Now, I was fully expecting to lose money on the deal, because I felt that CRO-USD had already risen dramatically. But as of this moment — things can change in a heartbeat of course — I’m profitable by around 6%.

I explained my position regarding CRO-USD in a recent InvestorPlace article. But if I had to summarize my three main points, I would say that Crypto.com is a practical, credible business venture.

You see, with other blockchain projects, they tend to bite off more than they can chew, espousing lofty beliefs akin to curing cancer or saving the world.

With Crypto.com, you’re getting a comprehensive financial and business ecosystem tied to services that people actually want. And CRO-USD tokens are very accessible to the masses, priced at less than 75 cents per unit.

I’m very excited about the future of CRO-USD and I think you should be too.

On the date of publication, Josh Enomoto held a LONG position in BTC-USD, ETH-USD, ADA-USD, DOGE-USD and CRO-USD. 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.