Fundamentally, cryptos face a significant wall of worries. As loyal as the ardent blockchain supporters can be, money is not an unlimited resource. As the Federal Reserve Bank of St. Louis indicated, while disinflationary trends have brought some encouragement, inflation remains stubbornly elevated. Naturally, this dynamic raises the prospect of higher interest rates, which wouldn’t be great for virtual currencies.
Another matter to consider is the rise in mass layoffs. Last year, the pink slips flew throughout the technology sector. However, these days, people are losing their jobs across multiple industries. We’re not talking about burgers-and-fries type of employment but rather at storied institutions. Put another way, monetary policy decisions don’t occur in a vacuum, putting cryptos under a dark cloud.
Still, let’s give credit where it’s due. Unlike some meme stocks, cryptos have shown tremendous resilience and it’s not just based on technical rumblings. With anticipation running hot for an approval for a spot-crypto exchange-traded fund, robust enthusiasm again returned to decentralized digital assets. Climbing over understandable anxieties, there could be something to this rally.
Nevertheless, investors will want to maintain vigilance, leveraging sound analyses over apocryphal claims caked in survivorship bias. On that note, below are cryptos to consider.
Bitcoin (BTC-USD)
Sparking another impressive rally, Bitcoin (BTC-USD) only gained about half-a-percent in the past 24 hours from Monday night trading. However, over the past seven days, BTC gained nearly 3%. As well, the current price tag stands well above the $37,000 level. At this point, the benchmark crypto only needs to gain about 7% to hit the all-important $40,000 milestone.
Could it get there? That’s the tricky part. For those worried about the emotions of the fear of missing out (FOMO), putting a little bit of capital to work here might not be the worst idea. However, I would question going all-in and that’s because of less-than-stellar blockchain analytics. In particular, BTC’s on-chain signals show a consensus bearish sentiment.
Notably, net network growth – which provides true growth stats of the underlying cryptocurrency network – sits at 0.3%, which is historically low. Also, large transactions (defined as anything greater than $100,000) fell to 0.26% below zero.
On the positive front, 79% of Bitcoin holders are in the money. Therefore, it’s possible to expect heightened support.
Ethereum (ETH-USD)
While not quite synonymous with cryptos as Bitcoin is, Ethereum (ETH-USD) as the number two decentralized asset by market capitalization commands substantial influence. For ETH, the main point for bulls is that it continues to hold the critical $2,000 level. Over the past 24 hours, the coin gained 1.3% of market value. However, in the trailing seven sessions, it dipped about half-a-percent.
Still, the resilience of ETH against broader pressures conspiring against the consumer economy offers encouragement. Still, the question about forward progress plagues objective market observers. What raises eyebrows here is the on-chain signals. With the consensus sentiment coming in as unanimously bearish, this framework should give pause to prospective investors.
Notably, net network growth for Ethereum sits at only 0.19%. Also, the concentration of large holders’ position in ETH witnessed a 0.18% decline. Finally, large transactions make up only 1.42% of the total, a historically low stat.
To be fair, Ethereum’s 50-day moving average is on the cusp of breaking above its 200 DMA, which is positive. Still, I would cautiously roll into this coin if you’re bullish.
Tether (USDT-USD)
For those new to cryptos, dedicating space to Tether (USDT-USD) may seem odd. As a stablecoin or digital asset pegged to a hard (fiat) currency, USDT doesn’t respond to capital market fluctuations in the traditional sense. Instead, Tether “freezes” wealth within the context of the blockchain, enabling convenience in blockchain transactions. However, major stablecoins effectively provide liquidity, thus making it integral for virtual currencies.
What continues to raise attention is the bearish signals emanating from its on-chain data. As with Ethereum above, Tether suffers from unanimously bearish signals. Most pressingly, USDT’s concentration of large holders saw a reduction by 0.36%. Also, USDT tokens that are “in the money” (ITM) sits at 0.3% below zero. Primarily, this suggests that Tether spent significant time trading below its one-to-one peg with the dollar.
To be sure, that’s not a catalyst for panic. However, it’s also important to note that cryptos lack central regulation and therefore do not enjoy protections. Therefore, you want to keep your exposure modulated based on your personal risk tolerance.
Remember, the Federal Deposit Insurance Corporation (FDIC) doesn’t insure any crypto exchanges.
Solana (SOL-USD)
Covering on the basis of popular demand, Solana (SOL-USD) continued its stratospheric ascent. While in the past 24 hours, SOL only gained a bit less than 1%, over the trailing one-week period, SOL swung up 6%. That makes it one of the best-performing cryptos within the top 10 by market cap. At time of writing, Solana trades hands at over $57, setting up an enticing proposition.
In earlier publications for InvestorPlace, I stated that Solana must break out of the long-term support line of around $33 that recently acted as upside resistance. Obviously, the coin blew past this ceiling, which is the good news. Also, the level where it stands currently represents a historical inflection point.
However, the not-so-good news is that the next level of major support lands at around the $90 to $100 range. Clearly, the bulls have returned to Solana, which lends confidence to the narrative. However, volume has been fading since the beginning of November.
Typically, you’d like to see volume confirm rising price action, which may suggest a lull in the action. Still, for speculators, SOL is one to watch closely.
XRP (XRP-USD)
While Bitcoin recently captured the spotlight thanks to speculation about a spot-BTC ETF approval, XRP (XRP-USD) – which specializes in ultra-quick transactions suitable for micro payments – enjoyed the bulk of the attention. In July, XRP went parabolic as its founder, Ripple Labs, secured a critical legal victory against the U.S. Securities and Exchange Commission (SEC). However, the regulatory agency appealed, leading to a wild ebb and flow.
Indeed, encouraging news from the ongoing legal drama has helped invigorate sentiment in XRP, sometimes colloquially known as Ripple coin. To be sure, since the Nov. 6 session, XRP incurred a sizable dip. At the same time, as mentioned earlier, fundamental support appears strong. With XRP still trading above its 50 and 200 DMAs, it might be worth a speculative poke.
Also, XRP could be a leading indicator for other cryptos, with its rally fading since Nov. 6. If so, that lends credence to the idea that investors should roll slowly into virtual currencies rather than going all-in at this juncture. It’s still possible for a correction to materialize, meaning that caution is still key.
Chainlink (LINK-USD)
Another possible leading indicator for cryptos could be Chainlink (LINK-USD). One of the most popular altcoins during the post-pandemic boom, LINK subsequently incurred a long stretch of sideways trading. However, since the second half of October, the blockchain asset saw a dramatic reversal of fortune. Trading hands at around $7, it now stands at $14.45 at time of writing.
Naturally, during the upswing, volume levels skyrocketed from previous norms. Still, accumulation started to wane noticeably in recent sessions. Not surprisingly, LINK slipped about 4% in the trailing 24 hours. Over the past one-week period, it dipped more than 1%. Could a near-term correction be materializing? It sure looks that way. If so, patience may be key, not just for Chainlink but for other cryptos.
Interestingly, TipRanks shows that LINK’s on-chain signals point unanimously in a bearish direction. Conspicuously, the concentration of large holders declined by 0.28%. Also, net network growth only came in at 0.34%, a historically low stat.
Finally, only 55% of holders are ITM. Therefore, Chainlink could be susceptible to selling pressure from the weak hands of the market.
Avalanche (AVAX-USD)
Another enticing cryptocurrency, Avalanche (AVAX-USD) represents a layer one blockchain, an underlying protocol that forms the foundation for a decentralized network. Per CoinMarketCap, Avalanche functions as a platform for decentralized applications and custom blockchain networks. It’s a key rival to Ethereum, with developers looking to usurp ETH as the most popular blockchain for smart contracts.
Although fundamentally relevant, AVAX suffered alongside other cryptos last year. With inflation skyrocketing and the Fed broadcasting aggressive interest rate hikes, risk-on assets lost much of their support. However, with the recently reinvigorated sentiment, AVAX attempted to make up for lost time. Indeed, over the trailing one-week period, it popped up slightly over 24%, making it one of the top performers among all virtual currencies.
Still, even with the incredible gains, investors need to be careful. On-chain signals point to a unanimously bearish sentiment. As with other cryptos, the concentration of large holders declined by 0.33%. Also, net network growth has been minimal at only 0.34%.
From a tactical perspective, it’s good to have eyes on it. But with AVAX still being overheated, caution is warranted.
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.
