Seemingly operating under a never-say-die attitude, the cryptocurrency sector continues to hold above the $1.15 trillion market capitalization level, though individual cryptos now face a familiar obstacle: the Federal Reserve. Specifically, the June jobs report probably didn’t do enough to convince the central bank that additional interest rate hikes aren’t necessary. Therefore, the market might move to a risk-off cycle, imposing difficulties on virtual currencies.
To be fair, no one knows with absolute authority what the Fed will decide when policymakers meet later this month. However, the employment print left much to be desired. While the headline 209,000 jobs added came in below economists’ expectations, the unemployment rate declined (albeit slightly). Also, wage growth remained steady month-to-month while the length of the average work week increased.
Put another way, more dollars continue to chase after fewer goods. With the Fed wanting to see the opposite circumstance materialize, cryptos may suffer. Indeed, the best course of action may be to hope for the best but assume the worst. This way, you’re pleasantly surprised if something favorable materializes. With that, below are seven cryptos at a potential crossroads.
Bitcoin (BTC-USD)
After breaching the $30,000 level in the second half of June, Bitcoin (BTC-USD) bulls have done an excellent job keeping the digital asset above this critical threshold. Unsurprisingly, the sustained optimism for BTC kept many other cryptos afloat. However, with a critical monetary policy decision coming up, investors will be raising some important questions that center on viability.
To be blunt, the latest print isn’t exactly encouraging. While Bitcoin popped up a little over 1% in the past 24 hours, in the trailing week, it lost more than 2%. More pertinently, BTC has been trading in sideways fashion since June 21. Generally, cryptos don’t “like” to stay static like this. Instead, you’ll probably see big moves to the upside or down.
Ahead of a possibly consequential change in monetary policy, I’m reminded about how similar the all-time BTC chart is to the often-cited psychology of a market cycle that I’m sure you’ve seen across the internet. Almost surely, we’ve passed the anger and depression phases, but could the current price action be a sucker’s rally? I’d be lying if I said I wasn’t concerned.
Ethereum (ETH-USD)
Printing an encouraging though more volatile price action than Bitcoin, Ethereum (ETH-USD) initially soared past the $1,900 level on June 21. Since then, ETH made a concerted effort to breach the $2,000 threshold. However, it wasn’t quite mission accomplished, with the coin currently struggling to get back above $1,900.
As with other cryptos, Ethereum is presently struggling for traction. At time of writing (the late evening of the Monday session), ETH finds itself up around 0.6% over the past 24 hours. However, in the trailing one-week period, the second-most-valuable digital asset gave up 4% of market value. Given the frustrating sideways trading, the bulls need to find a way above $1,900 and hopefully toward 2K.
Still, the monetary policy decision clouds Ethereum as it does most other cryptos. Again, Ethereum’s all-time chart presents a less-than-encouraging picture. True, it’s possible that the latest rally that started June 21 could lead to more substantive gains. However, it also reminds me of a classic sucker rally, as Investopedia puts it. Again, I’d be cautious here.
Tether (USDT-USD)
As a stablecoin or digital asset pegged to a hard currency, Tether (USDT-USD) distinguishes itself from most other cryptos. More than likely, if you’re buying Tether, you’re doing so to carry wealth in the form of a blockchain-derived virtual currency. This way, should an opportunity arise that requires immediate attention, you can respond.
Fundamentally, the fiat-to-crypto conversion can be cumbersome and also time consuming, depending on your platform. With Tether ready to deploy at a moment’s notice, however, you enjoy flexibility and adaptability. Nevertheless, even in this special segment of cryptos, prospective investors face substantial risks.
As CoinGeek pointed out, Tether the enterprise’s reports about its financial status do not represent formal audits. Moreover, the entity has never submitted its alleged reserves to an actual, honest-to-goodness independent audit. It’s the modern equivalent of a wildcat currency.
In all fairness, Tether has stood the test of time, especially with the regional banking crisis earlier this year. Nevertheless, prospective investors will want to stay on their toes.
XRP (XRP-USD)
With multiple blockchain or digital asset-related platforms feeling the heat from the U.S. Securities and Exchange Commission (SEC), it only seems right to mention Ripple Labs, the enterprise behind the XRP (XRP-USD) coin. To make a long story short, the SEC went after Ripple a few years ago for allegedly skirting securities law when it issued XRP. Ripple has long denied the charge.
Interestingly, as various advocates of cryptos digest the ongoing legal rumblings, many if not most of these experts have an optimistic take on XRP. While I don’t want to throw my two cents in simply because of the unpredictability of the courtroom, I’ll say this much. If the court rules in favor of Ripple, XRP would enjoy legal precedent, which may spark massive upside.
Indeed, Kralow Capital founder and manager Thomas Kralow stated in an interview that should legal winds favor the controversial enterprise, XRP could soar in the short term to $30. Considering that XRP trades hands at just below 50 cents, such an outcome would be a gamechanger.
I’m not sure I’d forecast a price target that high. However, speculators might want to keep tabs on XRP.
Cardano (ADA-USD)
If cryptos tend to trade similarly to each other, then Cardano (ADA-USD) may be sending off a massive warning. At first glance, nothing really seems to be amiss, at least not compared to other virtual currencies. For example, in the trailing 24 hours, ADA gained nearly 2% of market value. In the trailing week, it dipped 3%, which isn’t that remarkable in context.
However, if you pull up the price chart for Cardano, you’ll notice that since last month till today, ADA printed an ascending triangle with a flat top. This signifies that the bulls have attempted to push past a key resistance line but have so far failed. It’s possible that the optimists can continue trying to break above resistance.
Unfortunately, it’s also possible that the bulls can get “tired,” exposing ADA to a sentiment down wave. Moreover, if you go to Stockcharts.com and check out ADA’s three-year chart (use the ticker “$ADAUSD” in the “Symbol” box), you’ll notice that the next logical support line is around 10 cents.
I’m not guaranteeing that ADA could fall down there. Still, it wouldn’t be out of the realm of possibility.
Solana (SOL-USD)
Initially billed as one of the Ethereum killers, Solana (SOL-USD) has suffered disproportionately relative to other major cryptos. While competing digital assets have printed enough of a recovery pattern to spark debate about their viability (or if it’s really just a sucker’s rally), with Solana, it’s fighting to keep its head above water. Since mid-Jan. of this year, SOL has ebbed and flowed at the $21 price point.
However, Solana bulls are trying to spark a legitimate comeback. Over the past 24 hours, SOL gained almost 2% of market value. In the trailing one-week period, Solana swung up more than 12%. While encouraging on many levels, it’s crunch time for Solana.
One major positive to take away from its recent rally is that SOL ($21.71) now trades noticeably above its 200-day moving average ($20.21) and 50 DMA ($18.50). Still, it must keep its feet moving. A not-so-pleasant indicator is that volume levels have conspicuously diminished since Jan. Right now, that’s not what Solana needs. Instead, it must marshal as much sentiment and trading activity as possible.
Dogecoin (DOGE-USD)
Although compelling on one hand because of its immense popularity with the retail investor crowd, Dogecoin (DOGE-USD) also frustrates with its volatility and unpredictability. In the trailing 24 hours, Dogecoin gained almost 1% of market value. Unfortunately, in the trailing one-week period, it slipped more than 5%. It’s possible, though, that traders could be angling for another pop higher.
However, those traders will need to have an iron will. Over the past week, Dogecoin – which is priced at 6.5 cents at time of writing – noticeably slipped below its 50 DMA (6.7 cents). If I’m being completely honest, I’m not liking the subsequent pensive price action after DOGE slipped below the aforementioned threshold. From a confidence-instilling standpoint, I’d like to see the bulls push decisively harder from here.
If not, the weight of the upcoming Fed decision could negatively impact Dogecoin. Let’s face it – if cryptos represent risk-on assets, then DOGE is among the riskiest in this speculative field. I suppose gamblers can bank on popular sentiment. Otherwise, more conservative investors should probably wait on the sidelines.
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.
