Representing an exercise in frustration, the cryptocurrency sector failed to make good on the positive implications of its recent rally, strongly implying that investors should gird themselves for volatility, if not outright take some risk off the table. Reaching near a total market capitalization (cap) of $1.3 trillion, a sharp downturn in cryptos saw the blockchain market dip sharply to around $1.2 trillion.
Of course, virtual currencies have accrued a reputation for wild volatility, so such sector losses are nothing new. However, context is important. With cryptos as a whole failing to break consistently above the $1.3 trillion market cap line, they risk meandering in a consolidation pattern. The problem is, we saw a similar sideways consolidation in late 2018, with the sector failing to drive convincingly above the $200 billion level.
As you can see from the historical chart, the lengthy consolidation eventually gave way to a severe decline in market value. While hindsight shows us that cryptos eventually made a strong comeback, this lesson reminds us that anything and everything is possible in this arena.
Therefore, put away your assumptions about the trajectory of digital assets as we navigate these tumultuous cryptos together. Here are my top seven cryptos to watch now:
Cryptos to Watch: Bitcoin (BTC)
Putting participants of cryptos through an agonizing ride, Bitcoin (BTC-USD) made a surprise trip above the $30,000 level on Jun. 5, followed up with a move above $31,000 throughout most of the Jun. 6 session. Alas, the positive implications of the rally was not to be. In the afternoon, Bitcoin straight up dropped, taking the price tag below $30,000.
As I write this, BTC is trading hands at around $29,500, which is roughly the average price point since May 11. On one hand, it’s encouraging that Bitcoin has held tightly to the $29,000 level, which is acting as robust support. But on the other hand, I’m concerned about the ghosts of 2018. Back in the latter months of that year, BTC was trading sideways around the $6,400 level.
Naturally, many investors thought that bullish momentum would swoop in. Wrong! In December 2018, BTC dipped to the approximately $3,200 before embarking on its remarkable rally.
Here’s the point. While Bitcoin could eventually swing higher again, it’s not out of the question for BTC to suffer a sharp correction before that happens.
Another frustrating example of how cryptos can be incredibly cruel, during the Jan. 5 session, Ethereum (ETH-USD) popped its head above the $1,800 level, followed by $1,900 the next day. Interestingly, though, ETH provided an early warning indicator for Bitcoin and other cryptos. You see, popping above $1,900 occurred during the morning hours. Quickly, ETH began struggling, then dropped in the afternoon hours.
At time of writing, Ethereum is trading hands at roughly $1,750, which is a potentially worrisome technical state. In late May, ETH dipped briefly below $1,730, which is only a little over a 1% gap from the current juncture. Should the coin retest the aforementioned low and if the support line fails, that would likely cause a significant selloff for ETH.
Frankly, the volatility in cryptos as a whole is the reason why I’m focused on technical indicators. True, fundamentally, Ethereum arguably commands a substantial upside pathway. However, if you can load the boat at a much lower price, why wouldn’t you?
Cryptos to Watch: Tether (USDT)
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As someone who has traded cryptos with far more frequency than stocks, I’ll be the first to sing the praises of stablecoins like Tether (USDT-USD). Pegged to a hard currency – typically the U.S. dollar – stablecoins allow you to secure your profits, but in the realm of the blockchain. That way, you don’t have to constantly transfer funds from centralized institutions (i.e. your bank) to crypto exchanges.
However, this convenience and rapid-fire transaction speed comes at the cost of losing sleep. With the dramatic implosion of Terra Classic (LUNA–USD) – which has been rebranded as such following the disaster – the stability of stablecoins and associated assets are nowhere near guaranteed. Now, Tether is backed by paper reserves (supposedly) rather than an algorithm, making USDT theoretically more secure.
But just how much are investors at large going to trust the unaudited books of Tether and other stability-oriented cryptos? For me, Terra was a massive wake-up call, causing me to protect myself with a major transfer back to fiat.
A familiar face among alternative cryptos or altcoins, Cardano (ADA-USD) has secured the number six slot in terms of market cap, sitting at around $22 billion. Fundamentally known for pioneering the proof-of-stake protocol – a consensus mechanism that advantages network engagement over raw computing power – Cardano commands serious street cred. However, it’s also been found lacking in terms of technical strength.
At the time of writing, ADA is trading hands at the 58-cent level. The main contention here is that the digital asset needs to start making significant progress to accrue enough investor confidence. Despite the huffing and puffing, Cardano still trades below its 50-day moving average, a common barometer of nearer-term market strength.
As I’ve stated before, Cardano really needs at minimum to be above $1, which is coincidentally where its 200 DMA stands. Another issue is that declining volume is not confirming the recent uptick in price, suggesting that investors should be careful about unnecessary overexposure.
Cryptos to Watch: XRP (XRP)
Despite being a crowd favorite, XRP (XRP-USD) wasn’t immune to disappointing volatility. When it popped to a high of nearly 41 cents during the wee hours of Jan. 6, international investors were no doubt encouraged that the coin – the subject of a Securities and Exchange Commission lawsuit – could possibly be on the cusp of a major rally.
Unfortunately, those hopes faded quickly, with XRP again finding itself down at the 39-cent level. That said, XRP may offer confidence-inspiring news. According to Brad Garlinghouse, the chief executive officer of Ripple Labs which created the XRP coin, volume for the XRP-powered cross-border payment service called On-Demand Liquidity increased to $8 billion during the first quarter of 2022.
This tally compares very favorably to the $1 billion posted during the same quarter last year, suggesting that XRP’s overall momentum involves more than just mere speculation. If so, this dynamic substantially distinguishes XRP from other cryptos.
Still, caution is always the key when dealing with virtual currencies, especially at this juncture.
Source: Stanslavs / Shutterstock.com
While other cryptos were absorbing significant losses on a trailing-week basis since the late-evening hours of Jun. 6, Chainlink (LINK-USD) actually found itself up nearly 2%. That’s a significant departure from the top 10 virtual currencies by market cap, which with the exception of stablecoins were all down. Could LINK be a bright spot in an otherwise dour environment for digital assets?
Fundamentally, Chainlink has always been intriguing – one of the favorites among InvestorPlace analysts. Utilizing its unique architecture, Chainlink enables greater utility for smart contracts by incorporating off-chain data into decentralized deals. For instance, a LINK-empowered smart contract can facilitate transactions involving the price of coffee beans, which represent an “analog” construct.
Further, LINK is priced very attractively now, around $7.60 at time of writing. Essentially, the entry tag actualizes a time capsule opportunity for investors who regrettably watched Chainlink cross above $50 at its peak. Nevertheless, the same cautionary principle for other cryptos applies here, as well.
Cryptos to Watch: Helium (HNT)
As of this writing, the best-performing crypto over the trailing-week basis is Helium (HNT-USD). Billed as a decentralized blockchain-powered network for the Internet of Things – specifically smart devices – the Helium platform allows low-powered wireless devices to communicate with each other and send data across a network of nodes.
Presumably, Helium can help address growing wealth disparities by forwarding technological equity. Essentially, by enabling greater connectivity capacities for historically disenfranchised communities across the globe, this blockchain technology can potentially make a significant impact.
Interestingly, Coinpaprika.com suggests favorable liquidity for Helium, with the metric leaning to the bullish spectrum by a magnitude of 7%. Is this and its outperformance compared to other cryptos enough to take a shot with HNT?
Should it be able to break above the $10 resistance line, it could get interesting for the optimists. However, HNT being a smaller player is likely subject to the whims of other cryptos. If the sector falls, don’t be surprised to see a return to $4.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, ADA, XRP and LINK. 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.