Dramatically living up to the “Uptober” market phenomenon, cryptos surged on sensational speculation that the benchmark blockchain asset will enjoy another avenue of participation. Specifically, traders are betting that the U.S. Securities and Exchange Commission (SEC) will approve a spot cryptocurrency exchange-traded fund (ETF), which could change the game for digital assets in terms of institutional support. Still, investors must consider all angles.
Understandably, individual cryptos weren’t the only beneficiary of the spike in demand. Blockchain miners such as Marathon Digital (NASDAQ:MARA) have struggled for traction in recent months. Looking into MARA’s options flow screener – which exclusively filters for big block trades in the derivatives market likely made by institutions – traders pushed up the strike price substantially as expected.
However, the lower end strike price range is also rather steep, reflecting concerns about possible tail risk. In other words, traders anticipate greater demand for cryptos. At the same time, they also recognize that circumstances can get squirrely, thus widening the perception of probabilities.
Since that’s what the smart money is thinking, you just need to be careful. Speculate if you understand and accept the risks but do so in a levelheaded, non-emotional manner.
Bitcoin (BTC-USD)
Of course, the star of the show is Bitcoin (BTC-USD). As the pioneer of the blockchain ecosystem, all cryptos look to BTC for sentiment leadership. With The Wall Street Journal reporting that many investors and analysts believe the odds of the US SEC approving a spot Bitcoin ETF have increased significantly, it’s natural that the underlying digital asset skyrocketed.
On paper, it’s a very impressive print and much needed too. In the past 24 hours from the early Tuesday morning session, Bitcoin gained nearly 12% of market value. Over the trailing seven days, it swung up more than 22%. Just as importantly, BTC blew past its 50 and 200-day moving averages, which sit at around $27,370 and $28,109, respectively.
At time of writing, Bitcoin trades hands at a few bucks shy of $34,500. Moving forward, the tricky narrative focuses on volume. When assessed from a long-term weekly average, volume levels have improved but not nearly to levels seen in early 2021 and even early this year. Thus, a vigilant approach may be necessary.
Ethereum (ETH-USD)
While Ethereum (ETH-USD) backers have long pondered the possibility of reaching the number one slot by market capitalization, ridding the coattails of Bitcoin isn’t a bad place to be. Also, with major Wall Street players declaring that the winter season in cryptos is over, sentiment for several alternative blockchain assets (or altcoins) has likewise skyrocketed.
Regarding ETH, the silver medalist jumped up almost 8% in the trailing 24 hours. Also, in the past one-week period, the coin gained over 15% of market value. According to data from Google Finance, Ethereum has returned nearly 53% for patient stakeholders. Still, investors should note some nuances with the number two crypto.
With the latest surge, ETH swung past its 50 DMA, which sits at just under $1,621. However, at a time-of-writing price of $1,828, it’s modestly above the 200 DMA line, which comes in at $1,785. As with other cryptos, investors should carefully monitor the volume backdrop.
Obviously, volume improved substantially on Monday. However, on an average basis, it’s still much lower than levels seen in prior years.
Tether (USDT-USD)
As a stablecoin, the value of Tether (USDT-USD) is pegged on a one-to-one ratio with the U.S. dollar. Therefore, the motivation to acquire or divest USDT runs differently to that of most other cryptos. With stablecoins, the main focus centers on securing profits in the blockchain. As well, investors aligning their funds in the crypto ecosystem can better respond to trading opportunities.
However, the 1:1 peg doesn’t always stay that way. Indeed, Tether can respond to various market pressures stemming from both the global (fiat) system as well as blockchain-related dynamics. Generally speaking, though, robust sentiment in the cryptocurrency sphere can lead to USDT units being priced higher than its dollar peg due to greater demand.
Interestingly, though, USDT current trades hands at a lower than 1:1 ratio with the greenback. It’s not a matter of panic nor does it necessarily mean something significant for virtual currencies in the long term. Nevertheless, it’s also possible that the lower peg indicates greater demand for dollars; that is, some traders may be selling into strength.
Keep that in mind since not everyone holds on for dear life (HODL).
XRP (XRP-USD)
Providing a small warning about not losing one’s head regarding cryptos, XRP (XRP-USD) earlier this year enjoyed a dramatic surge of value. We all know what happened so I’m not going to waste too much “ink” here. Suffice to say, the prospect of legal clarity for the controversial coin almost immediately came under pressure from the SEC. So, what was gained was eventually lost.
Setting aside the ongoing dispute between XRP founder Ripple Labs and the regulatory agency, XRP has been somewhat disappointing in October. Sure, it responded well to the big Bitcoin speculation, with the smaller altcoin gaining a bit over 3% in the trailing 24 hours. In the past one-week period, it returned stakeholders just over 10%. Still, that’s somewhat of a drag compared to other major cryptos.
At the present juncture, XRP comes in at a price of 54.3 cents. That’s modestly higher than its 200 DMA at 52.8 cents. And it’s not that much of a difference compared to the 50 DMA at 50.7 cents. Moving forward, volume concerns prevent me from being gung-ho about this altcoin, with levels subdued conspicuously from prior years.
Solana (SOL-USD)
While Bitcoin stole the show – as it usually does – true connoisseurs of cryptos will likely focus more on Solana (SOL-USD). After incurring months of frustrating trading after peaking this year in July, the other controversial coin – widely regarded as the personal project of disgraced crypto entrepreneur Sam Bankman-Fried (or SBF) – has finally had its day in the sun.
Per data from CoinMarketCap, SOL only gained about 1% in the trailing 24 hours. However, in the past seven-day period, SOL returned stakeholders slightly over 30% of value. As of this writing, that’s the biggest haul among the top 10 cryptos by market cap. Again, for context, Bitcoin gained 22% during the same period.
Previously in September, both the 50 and 200 DMAs imposed an upside resistance ceiling against Solana. However, trading hands at a bit more than $30 per unit, SOL is well above its aforementioned moving averages, which sit close at a rough average of $21.50.
Looking ahead, SOL still has a credibility challenge in terms of reduced relative volume. Still, if it can rise to $35, Solana could get very interesting.
Cardano (ADA-USD)
After struggling for so long compared to other cryptos, Cardano (ADA-USD) absolutely needed a win. Just to illustrate the point, even with Monday’s resurgence, ADA lost about 27% of market value in the trailing six months. Therefore, SOL investors will take the 5% lift it got in the past 24 hours, even if it’s not a dramatic lift.
Moreover, in the trailing seven days, ADA returned almost 13% for its beleaguered stakeholders. That’s not a bad haul considering the circumstances. Still, Cardano does find itself in tricky waters relative to many other decentralized assets. Most conspicuously, while ADA at 28.1 cents swung sharply above its 50 DMA at 25.3 cents, it’s still below its 200 DMA at 30.8 cents.
Being sandwiched between the key moving averages suggest that Cardano is still vulnerable to bears picking at it if it doesn’t build on its momentum. One factor to watch out for now is that ADA is in overbought territory based on the relative strength indicator (RSI).
Also, I have to call out the long-term volume levels. It’s just dead compared to prior years so volatility should be expected.
Dogecoin (DOGE-USD)
A love-it-or-hate-it type of virtual currency, the joke turned global meme Dogecoin (DOGE-USD) has struggled heavily since August. At the time, DOGE utterly collapsed, scaring off all but the most dedicated HODL-ers. It’s fair to say that now, much of that patience has been rewarded. In the past 24 hours, Dogecoin returned nearly 7% of market value.
More importantly, in the trailing week, the meme coin returned its stakeholders just over 12%. With this performance, the crypotocurrency trades hands at 6.7 cents, noticeably above its 50 DMA (at 6.1 cents). However, there’s much work to be done. Similar to Cardano above, DOGE trades below its 200 DMA (6.9 cents). Unless it can move above this moving average sandwich, the meme is still vulnerable to bearish speculation.
Also, DOGE has entered into overbought territory with an RSI reading of nearly 71 points. To be fair, volume levels have increased robustly. Nevertheless, Dogecoin is not in a unique position relative to other blockchain assets.
Compared to prior seasons of acquisitive behavior, volume is patently deflated. Because this dynamic may lead to greater-than-average turbulence, a cautious approach is your friend.
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.
