Although cryptos to watch, and the transformative potential of the underlying blockchain technology always carried a renegade profile, this distinct characteristic now attracts the wrong kind of attention. Last week, the U.S. Securities and Exchange Commission (SEC) sued Binance, the world’s largest crypto exchange. Soon after, the regulatory agency went after Coinbase (NASDAQ:COIN), a popular virtual currency platform.
According to Yahoo Finance, the US SEC stated that 13 individual cryptos accessible to Coinbase customers represented “crypto asset securities” that should have been registered. These included three digital assets which I’ll discuss later. In response, online trading platform Robinhood (NASDAQ:HOOD) announced that it would cease facilitating trades for the three coins in question.
On paper, the regulatory action might appear only damaging to certain alternative cryptos or altcoins. Unfortunately, the glaring spotlight could negatively affect the entire blockchain ecosystem. Essentially, draconian measures could devastate the crypto economy in the U.S. by knocking out the major retail platforms. Yes, you can argue cold storage. However, trading volume will almost surely decelerate aggressively if Binance and Coinbase go under. Therefore, it’s important to approach this arena cautiously.
Cryptos to Watch: Bitcoin (BTC-USD)
For all the drama that impacted cryptos to watch recently, Bitcoin (BTC-USD) has held up relatively well. In the trailing 24 hours from Monday afternoon, BTC slipped just under 1%. Over the trailing one-week period, the coin gained almost 1%. Nevertheless, the bulls have some work to do before it regains credibility.
Currently, Bitcoin trades hands at under $25,900. Significantly, it’s sandwiched between its 50-day moving average above at $27,453 and its 200 DMA sitting at $23,598. Also, it’s worth pointing out that an attempt by BTC bulls to cross above the 50 DMA late last month failed. Even with Washington reaching a critical deal regarding the debt ceiling, the news couldn’t lift Bitcoin.
As I’ve stated before, what bothers me about Bitcoin (and other cryptos) is the formation of a possible head-and-shoulders pattern. If this hypothesis proves correct, Bitcoin could test this year’s low of around $20,000 before sparking a head-fake. After corralling unsuspecting bulls, BTC could suffer a steeper decline. Therefore, it may be best to maintain a cautious posture here.
Cryptos to Watch: Ethereum (ETH-USD)
As the second-most valuable among all cryptos to watch by market capitalization, Ethereum (ETH-USD) always deserves careful consideration. Recently, its price action has been volatile compared to Bitcoin. In the trailing 24 hours, ETH lost about 2% of market value. During the trailing week, the much-celebrated coin fell nearly 4%.
Following a similar plight to many other cryptos, Ethereum finds itself sandwiched between the 50 DMA up top and the 200 DMA below. But how it got to this point presents a narrative of distinction. Up until a few days ago, ETH’s price action generally correlated with its 50 DMA. Unfortunately, ETH dropped sharply on June 10, suggesting the bears are starting to control the market.
What’s also not encouraging is that Ethereum appears to be charting a head-and-shoulders pattern as well. Again, if this hypothesis turns out to be accurate, it wouldn’t be a shocker to see ETH test its low of this year (approximately $1,400). Later, it might respond with a head-fake before going even lower. Because of the vagaries affecting cryptos right now, a conservative approach may be best.
Tether (USDT-USD)
As a stablecoin or digital asset pegged to a hard currency, Tether (USDT-USD) typically carries a one-to-one ratio with the dollar. Nevertheless, certain dynamics or fluctuations can tilt this ratio in either direction. Interestingly, as of this writing, USDT trades in and out of the perfect ratio. It occasionally slips to 0.9999 of a buck.
Now, is that a cause for concern? Hardly. However, investors don’t want to be too complacent with Tether. To be fair, USDT weathered multiple questions about its viability and sustainability. It remains standing tall despite the increased scrutiny and other destabilizing events, such as the regional bank failures. Still, without official government backing, you’re taking major risks via arguably unnecessary overexposure.
At this point, you must also consider the fading utility of stablecoins. Under normal market cycles, Tether and its ilk facilitate quick and convenient transactions related to cryptos. However, if regulations stymie the blockchain ecosystem, the applicability of stablecoins may decline in magnitude. Thus, even here, investors need to be careful.
XRP (XRP-USD)
With regulatory fire directed at Binance and Coinbase, XRP (XRP-USD) – the target of another US SEC lawsuit – performed comparatively well. In the trailing 24 hours, XRP gained a bit over parity. However, in the past seven days, the controversial coin moved up nearly 4%.
According to U.Today, the XRP community expects publicly redacted documents of former US SEC official William Hinman to be revealed shortly. The underlying statements refer to the lawsuit that the regulatory agency filed against Ripple Labs, the creator of XRP. Because of the charges against the aforementioned virtual currency platforms, the revealed documents may provide clues for what’s next for other cryptos.
In the meantime, XRP enjoys a much more confident-looking chart. At 53 cents, XRP trades above its 50 DMA (at 47 cents) and its 200 DMA (42 cents). Nevertheless, investors don’t yet have a green light as fading volume trends clash with the rising price. Therefore, staying on the sidelines might not be a bad idea.
Cardano (ADA-USD)
One of the three cryptos to watch that Robinhood plans to axe from its platform, Cardano (ADA-USD) has long been a popular altcoin. However, it also consistently underperformed the major virtual currencies. Recently, the red ink has been downright ugly. While it’s up slightly in the past 24 hours, in the trailing week, it hemorrhaged nearly 21% of market value.
From a technical analysis standpoint, ADA may be courting serious problems. Unlike other cryptos, there’s no sandwiching of the moving averages involved. Instead, trading at 27.7 cents, Cardano sits well below its 200 DMA (at 35.1 cents) and its 50 DMA (36.6 cents). Having broken below key support lines, the bears might be smelling blood.
As the number seven virtual currency by market cap, Cardano represents a known commodity among cryptos. However, losing access to popular trading platforms could be disproportionately devastating for ADA. Let’s face it – ADA is almost perfect for speculation given its ultra-low price. Therefore, it may be better to wait for regulatory clarity before proceeding.
Solana (SOL-USD)
Another one of the cryptos that will soon be “delisted” from Robinhood, Solana (SOL-USD) seems to be hitting every branch of the ugly tree. Once among the blisteringly hot altcoins – a so-called Ethereum Killer – Solana has been gasping for air these days. Several months ago, its loose association with disgraced FTX founder Sam Bankman-Fried hurt SOL’s market value. Now, a platform delisting really puts the hurt on.
In a similar plight to Cardano above, Solana trades hands at $15.17. That’s well below its 200 DMA of $19.55, let alone its 50 DMA ($20.55). Hanging precariously in the charts without much support, the bulls need to jump on this trade. Otherwise, the sudden plunge of its price tag will almost surely attract the bears. In the meantime, the weak hands may get shaken out.
Over the past 24 hours, Solana lost nearly 5% of market value. During the past week, it tanked almost 24%. Again, given the ferocity of the red ink, investors may want to stay away for now.
Polygon (MATIC-USD)
Finally, the third coin that Robinhood plans to remove from its trading app is Polygon (MATIC-USD). Another formerly popular altcoin, MATIC may be among the most desperate cryptos at this juncture. In the trailing 24 hours, it lost a bit more than half-a-percent. During the past seven days, MATIC slipped nearly 23%.
Even more worrisome than this near-term print is the utter erosion of its market value. Presently, MATIC trades hands at 64 cents, far below its 50 DMA at 89 cents and its 200 DMA at $1.01. Problematically, up until late April, Polygon’s 200 DMA provided support. However, the price action faded to the point where the undercrossing 50 DMA imposed upside resistance in late May.
Obviously, the bulls couldn’t make progress, leading to a catastrophic decline in value. Presumably, we’re looking at a do-or-die moment for MATIC right now. If the bulls don’t show up, Polygon could easily fall back to around 40 cents. In my opinion, the risk is simply too great.
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.
