7 Cryptos to Watch as Inflation Weighs the Blockchain

Although the cryptocurrency market got off to a strong start to the new year, it appears that circumstances are about to turn unfavorably, suggesting that investors should consider taking corrective action to watch their cryptos. At the very least, market participants must be aware of potential influencing factors.

Primarily, a stubbornly high inflation rate — thanks to a higher-than-expected personal consumption expenditures (PCE) index — means the Federal Reserve may have its work cut out for it. Given the central bank’s commitment to tackling inflation, policymakers may decide to go aggressive with their rate hikes. If so, it wouldn’t organically distribute cryptos to watch.

Second, government officials have started more talk about regulations for virtual currencies. On paper, such a framework should be positive for crypto, as it implies standardization and thus predictability. But as with everything else in life, greater predictability means less reward potential. With sentiment weakening for risk assets, investors should approach the blockchain arena cautiously. Below are seven cryptos you can watch.

Bitcoin (BTC-USD)

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Heading into the beginning of the work week, Bitcoin (BTC-USD) managed to move up a modest 1.3% in the last 24 hours. However, in the following week, BTC gave up around 4% of its market value. On the eve of Monday morning’s session, BTC stood around $23,500. To inject confidence into the space, the coming week could be critical.

On the positive side, BTC is currently trading above its 50- and 200-day moving averages, which stand at $22,443 and $19,748 respectively. Going forward, however, it will be crucial to regain the $25,000 price point. From there, a long-term horizontal support line exists at $30,000.

Significantly, Bitcoin parked at 30K in early 2021 before bouncing sharply higher in the spring. It later parked there again before initiating a rally that reached an all-time high in November 2021. Therefore, reaching and securing 30K will be absolutely crucial for Bitcoin and other cryptos to see. If you don’t, BTC’s 200 DMA could provide support. However, the bears would be hungry if Bitcoin were to fall that far.

Ethereum (ETH-USD)

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Hours before the session on Monday morning, Ethereum (ETH-USD) managed to get just over 2% of the market value. However, it also struggled in the past week, falling around 3%. Perhaps more than Bitcoin, Ethereum needs to start attracting momentum in the near term.

At the time of writing, the current price of ETH (around $1,636) is almost at parity with the 50 DMA. Therefore, to keep the bears at bay and not get any funny ideas, ETH needs to push higher. At a minimum, of course, the second-in-command of all cryptos needs to secure the $1,700 level as a short-term target. From there it will be about the psychologically and technically significant 2K level.

In early April 2021, 2K applied a resistance barrier to Ethereum before quickly breaking through. In May, ETH changed hands at over 4K. As cryptos suffered their mini-collapse in the spring of 2021, 2K provided support before ETH shot up to record highs. Therefore, this price point has historical significance. Failing that, investors need to pray that Ethereum’s 200 DMA (at around $1,439) holds. Otherwise, things can get ugly.

Tether (USDT-USD)

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As a stablecoin or a series of cryptos to see tied to a fiat currency (usually the US dollar), Tether (USDT-USD) do not have large price swings, instead pipping higher or lower in micro-steps. During crucial bullish market cycles, exposure to Tether makes sense on many levels. By holding wealth in USDT, investors can react quickly to opportunities (instead of waiting for the fiat-to-crypto conversion process).

Still, with the drama attached FTX bankruptcy – along with many other blockchain-related projects imploding – Tether could lose much of its luster. Again, tighter regulations mean standardization, which should later force the revision of stablecoin networks. In this way, investors can be confident that their digital assets match one-to-one with the underlying paper.

Whether this is true or not, the market certainly believes that this relationship is as advertised. However, if any concerns emerge about this relationship or the ability to convert cryptos back to fiat, a digital bank run could materialize. I’m not saying dump all your bonds, as I personally have some units of USDT as well. However, you may want to trim excess exposure.

Cardano (ADA-USD)

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One of the slow performers of crypto recently, Cardano (ADA-USD) ahead of Monday morning’s session came close to getting just half a percent above parity. Unfortunately, ADA gave up about 10% of its market capitalization in the subsequent one-week period. While blockchain assets are notorious for their volatility, Cardano really takes the cake. Therefore, it has to start moving higher quickly before it attracts the bears.

Currently, Cardano sits in an unenviable position where the price point and its 50 and 200 DMAs converged. Technically, this framework suggests that the bears have started to gain some control over the market. Corroborating evidence comes in the form of declining volume trends. In this tug of war, it is crucial for the bulls to start helping the cause.

In the short term, Cardano needs to reach the first layer of horizontal support, which is around 45 cents. From there, it is some way up to the critical support line at $1. It was here that some impressive battles took place, and thus had a lot of historical significance. Should Cardano fail to move higher from the current time, it could be a nasty fall due to the aforementioned convergence.

Solana (SOL-USD)

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Another hard-hitting example among cryptos to watch, Solana (SOL USD) approached the last work week of February and gained over 1% in the last 24 hours. But in the last week, SOL gave up almost 14% of its market value. Adding to the problems, Solana has one of the strangest map patterns. Therefore, it needs a major breakthrough more than other digital assets.

As with Cardano above, Solana suffers from a convergence problem with its current price and its 50 and 200 DMAs rapidly approaching the same intersection. Also like ADA, Solana is suffering from generally declining volume since mid-January. As the participation fades, the circumstances do not seem favorable for the cryptos that were once labeled as Ethereum killers.

Going forward, Solana needs to hit and rise above the $30 level – that’s the minimum. From there, it needs to secure $40 as a baseline to attack $100. Unfortunately, that’s a big ask, especially with the Fed likely to raise interest rates more aggressively. The thing is, if SOL fails to make progress quickly, it could fall sharply to around the $14 level. Solana thus presents an unusually risky profile.

Ankr (ANKR-USD)

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Not everyone met the new week with a sour face. Special, Ankr (ANKR-USD) stood out as the top performer on a weekly basis heading into Monday morning’s session. During the mentioned time period, ANKR skyrocketed by 32%. And believe it or not, the blockchain asset is showing some promise.

At the time of writing, ANKR traded hands for around 4.4 cents. In contrast, its 50 DMA pinged at 2.9 cents, while its 200 DMA sat at 2.8 cents. Unlike many other cryptos, the broader rise of Ankr in the new year was in line with sharply increasing volume trends. Put another way, volume confirmed the price, which is what you want to see.

Now the big challenge going forward is the 7-cent level. After initially acting as a resistance barrier in the first quarter of 2021, it later acted as horizontal support. This line held true until crypto collapsed in the first half of 2022, a victim of the Fed’s hawkish policy. Should ANKR fail to advance from the current vantage point, it could fall back to 3 cents. So far, however, Ankr represents one of the most confident cryptos to watch.

Optimism (OP-USD)

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An exciting blockchain project, Optimism (OP USD) is one of the few cryptos to print green ink recently. Heading into Monday morning’s session, OP was up 4% over the past 24 hours. And over the past week, it jumped up about 12%. For potential investors, the case for Optimism is twofold.

First, the OP enjoys incredible speed. At the start of the new year, OP changed hands for less than a dollar. Currently the OP hit the ticker tape at a few pennies at $3. Overall, we are therefore looking at a performance so far this year of approximately 223%.

Second, the Optimism blockchain helps underpin the layer-2 blockchain network of the crypto exchange Coin base (NASDAQ:COIN). As you know, Coinbase provided countless conveniences for retail investors seeking exposure to crypto. Now the company wants to do the same for blockchain developers. Betting on Optimism essentially represents crypto fundamentals you can believe in – not an esoteric salad.

As of publication date, Josh Enomoto had a LONG position in BTC, ETH, USDT and ADA. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Guidelines for publication.