Although the cryptocurrency market enjoyed robust sentiment since a bullish upswing in late June, individual cryptos to watch again face scrutiny. Again, the familiar headwind of the Federal Reserve and its possible interest rate hike cloud the sector. Investors of blockchain-derived digital assets should know more once the Federal Open Market Committee (FOMC) concludes on July 26.
However, many market participants aren’t waiting around for the central bank to drop the axe, choosing instead to trim some exposure. As Barron’s pointed out, a few key cryptos to watch struggled to build off prior momentum as other investors headed for the sidelines. Essentially, virtual currencies may trade in a narrow range until the conclusion of the FOMC meeting, according to Yuya Hasegawa, an analyst at crypto exchange Bitbank.
Adding to concerns for cryptos to watch, CNBC reports that the consensus of experts believe a quarter-point interest rate hike is in the cards. Certainly, it wouldn’t be the most unexpected outcome. For one thing, the Fed paused rate increases last month. Second, while inflation started to cool, it remains well above policymakers’ 2% target. Depending on the Fed’s comments and broadcasted long-term intentions, cryptos to watch could go either way. Below are seven to watch.
Cryptos to Watch: Bitcoin (BTC-USD)
The benchmark for cryptos, Bitcoin (BTC-USD) suffered a conspicuous momentum drain after trading above the psychologically important $30,000 level for multiple sessions. In the evening hours of Monday, BTC traded hands for just under $29,200. In the trailing 24 hours, Bitcoin suffered a hit of nearly 3%. During the trailing seven days, it shed more than 3%.
In the near term, Bitcoin faces a do-or-die proposition. At the price previously mentioned, BTC sits just atop its 50-day moving average, a common gauge of nearer-term sentiment. It’s a tough backdrop for investors as a significant dip below the 50 DMA could attract the bears. For the digital asset to maintain its overall positive posture, it must hold the line.
However, investors should also note that since the first quarter of this year, volume levels have faded conspicuously. Even more problematic, this decline contradicts the overall price rise of Bitcoin. Ordinarily, investors look for rising volume to confirm a rally. Therefore, market participants may want to exercise healthy skepticism.
Cryptos to Watch: Ethereum (ETH-USD)
As with Bitcoin, Ethereum (ETH-USD) – the number two virtual currency by market capitalization – also suffered a noticeable drag to its market value. In the trailing 24 hours, ETH gave up nearly 2% of red ink to the bears. Over the trailing seven days, the coin fell more than 3%. At time of writing, it traded hands at just a few cents over $1,850.
For several sessions following the late June rally, Ethereum breached the technically important $1,900 level. As well, it briefly challenged the $2,000 mark though it could not sustain the move. In a similar plight to Bitcoin, Ethereum sits on its 50 DMA. To avoid further technical damage and draw in the bears, ETH must also hold the line.
Again, much of the near-term trajectory will depend on the Fed. If policymakers strike a more optimistic tone regarding the inflation equation, Ethereum and other cryptos could bounce higher. For now, the market is in a wait-and-see mode, not wanting to show its cards prematurely.
Tether (USDT-USD)
As a stablecoin or blockchain asset pegged to a hard currency, Tether (USDT-USD) doesn’t draw the same type of interest among investors as most other cryptos do. Obviously, a dollar-pegged asset lacks the wild mobility necessary to enjoy significant capital gains through a relatively modest investment. Still, Tether warrants a close inspection as it’s really the lifeblood of the virtual currency ecosystem.
Essentially, Tether enables crypto investors to hold their wealth in virtual currencies as opposed to fiat currencies. Primarily, this practice facilitates convenience, allowing heavy traders to skip the fiat-to-crypto conversion process (which can be time consuming on some platforms). At scale, Tether enables “money velocity” within the blockchain ecosystem, helping in part to draw interest to the space.
However, one factor to note about Tether is that since March, peak acquisition volume levels have been steadily fading. Therefore, investors will want to be cognizant about this dynamic before making big moves in cryptos.
XRP (XRP-USD)
Representing a major bright spot among cryptos, XRP (XRP-USD) skyrocketed based on a landmark federal court ruling. Essentially, XRP stands as the only digital asset to my knowledge that enjoys clear legal status as a virtual currency and not as a security. Of course, that’s a significant distinction as the U.S. Securities and Exchange Commission (SEC) initially accused Ripple Labs – the creator of XRP – of skirting securities law.
Subsequently, XRP went from trading under 50 cents to over 84 cents following the legal breakthrough. However, it might be too early to initiate significant exposure to the controversial blockchain asset. According to a Bloomberg report, the SEC is asking a federal judge to dismiss the aforementioned court ruling. The regulatory agency claims that the decision goes against existing securities laws.
Further, Bloomberg notes that the move may signal an intent to appeal the court’s ruling. Notably, XRP incurred some of the sharpest losses among the major cryptos. In the past 24 hours, the digital asset slipped almost 5%.
Cardano (ADA-USD)
Ranking among the most popular alternative cryptos or altcoins, Cardano (ADA-USD) commands a loyal following. Therefore, prior prognostications of its demise have been proven incorrect. Despite its steep volatility and wild trading, Cardano represents a resilient asset. Still, it’s obviously not immune to downside pressure. To avoid further damage, ADA needs to start showing some substance to market participants.
Between approximately June 10 through July 12, Cardano formed a flat-top wedge pattern. Given that the flat top imposed a ceiling of which the bulls at the time struggled to break above, ADA seemed enormously risky. However, on July 13, the blockchain asset broke above the ceiling, even managing to briefly breach its 200 DMA.
Unfortunately, ADA has struggled badly since then. At the moment, Cardano trades hands at 30.5 cents, less than 4% above its 50 DMA, which sits at 29.4 cents. Ideally, the bulls need to come in and lift the beleaguered asset. Otherwise, slipping below the 50 DMA could be bad news, especially if the Fed strikes a hawkish tone.
Solana (SOL-USD)
At time of writing, Solana (SOL-USD) represents the hardest-hit name among cryptos listed in the top 10 by market capitalization. In the trailing 24 hours, SOL lost 6% of market value. During the past seven days, it printed red ink to the tune of over 13%. For the bulls, this dynamic may be a case of too far, too fast.
In mid-June, SOL traded hands mostly below $15. One month later, the digital asset moved up beyond $27. But shortly afterward, Solana fell, in part because it technically became overheated. Plus, investors who had long suffered volatility decided to trim some exposure. Other speculators who recognized the wildness of SOL decided it was time to get out while the going was good.
Looking ahead, conservative market participants may want to wait until the Fed announces its intentions before making a move. Because cryptos represent purely risk-on assets, a hawkish monetary policy would not be ideal for the sector.
Dogecoin (DOGE-USD)
From the worst-performing name among the top 10 cryptos to the best, Dogecoin (DOGE-USD) raised some eyebrows recently. In the past 24 hours, DOGE managed to gain a hair over 4%. And in the trailing seven days, the meme coin swung up nearly 7%. Interestingly, since about the mid-June session, DOGE has been steadily marching higher.
But as impressive as the speculative digital asset has been, it faces a significant sentiment test. Right now, Dogecoin trades hands at just under 7.5 cents. It’s sitting right beneath its 200 DMA at 7.7 cents. At the same time, DOGE is sandwiched between the two commonly gauged moving averages, with the 50 DMA sitting at 6.7 cents. Moving forward, I would probably keep the powder keg dry. While all cryptos represent risk-on assets, Dogecoin in particular runs on meme-like sentiment. Therefore, I’d be more comfortable understanding what the Fed’s intentions are before making a major decision.
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.
