7 Cryptos to Watch When the Blockchain Hits a Downside
After a tough week in the cryptocurrency sector, as stubbornly high inflation highlighted fears about monetary policy, macro concerns are likely to dominate the process for crypto viewing again this week. As CNBC pointed out Sunday evening, investors will face a series of top-level economic data. Beyond comments from Federal Reserve Chair Jerome Powell, the coming February should move both stocks and digital assets.
In particular, economists polled by Dow Jones expect 225,000 jobs to have been added last month. This follows a blockbuster January jobs report that saw the economy grow by 517,000 payrolls. But if the employment figure goes better than expected, the Fed may raise the benchmark interest rate. To combat stubbornly high prices, interest rate hikes can be aggressive, thus hurting crypto.
Of course, if the latest data suggests that the Fed’s actions paid off, blockchain assets could move decisively higher. One thing is clear: investors need to approach cryptos to watch carefully this week.
Cryptos to Watch: Bitcoin (BTC-USD)
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In the early hours of the Monday session, Bitcoin (BTC-USD) found itself struggling for traction, losing about a third of a percent over the past 24 hours. But in the following week, BTC fell by almost 5% of its market value. Going forward, the Friday jobs report is likely to provide a clear path for BTC and other cryptos.
To be clear, the current technical profile of Bitcoin does not paint an encouraging picture. With the volatility that materialized last week, BTC fell below its 50-day moving average, which sits at about $22,973. It is comfortably above the 200 DMA, which sits around $19,708. However, it is not comforting for BTC to sit below its technical gauge in the near term.
On the other hand, Bitcoin has a pattern of falling prices and decreasing volume. Theoretically, this framework sets up a bullish interpretation. If a breakout occurs, crypto advocates will target the critical $30,000 level.
Cryptos to Watch: Ethereum (ETH-USD)
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Several hours before Monday’s opening bell on Wall Street, Ethereum (ETH-USD) found itself in a similar situation to Bitcoin. In the last 24 hours, ETH fell by about three quarters of a percent. And in the following week, the digital asset number two by market value fell almost 5%. As with other cryptos, high-level financial data should lay a clear foundation for either direction.
Technically, ETH’s profile strikes a cautionary note. Again, due to last week’s volatility, ETH suffered a drop below its 50 DMA, which stands at $1,611. In contrast, ETH is currently trading at $1,559. It is well above the 200 DMA, which is at $1428. Still, Ethereum will need to see upside momentum soon to interest bullish market participants.
However, it is worth noting that like Bitcoin, Ethereum is also seeing a decreasing volume and falling price setup. This could be the market getting rid of the weak hands before a wave of bulls enters the fray. If they do, ETH will have to take out the $2000 level.
Cryptos to Watch: Tether (USDT-USD)
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Over the past few months, I have cautioned investors to be cautious of excessive exposure to Tether (USDT-USD) and other stablecoins. While they offer convenience, we have seen the devastating impact of blockchain projects going sour. Often investors lose access to their cryptos or an underlying asset goes to zero. While I am not suggesting this will happen to Tether, it is not an impossible event.
Recently, The The Wall Street Journal noted that several companies supporting the USDT used forged documents and shell companies to help issuing businesses stay connected to the traditional financial system. Interestingly enough, according to WSJ, the US Department of Justice has investigated Tether. To be sure, it may not be the looming disaster it appears to be. Nevertheless, investors need to keep an eye on them.
Also, if crypto does not rise in value significantly and instead meanders aimlessly, the risk of holding USDT increases significantly. While Federal Reserve Notes may be boring, at least they are backed by the US government. With Tether? Who really knows?
BNB (BNB-USD)
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Ahead of the proper Monday morning session (that is, when everyone is awake), GDP (BNB-USD) was in a similar situation to the top two cryptos, only worse. In the last 24 hours, BNB has fallen around 1.6% of its market value. Over the past week, it fell by about 6.5%. Unsurprisingly, the chart pattern looks uglier than either Bitcoin or Ethereum.
Running a common theme for other cryptos, BNB fell below the 50 DMA, which is near $308. However, at a price of $286, BNB is essentially stretching its 200 DMA. Presumably, therefore, it needs encouraging economic data—or, more specifically, what the Fed considers encouraging—to kick-start the engine.
Unfortunately, BNB finds itself in the difficult position of underlining the Binance exchange. Given the countless failures and collapses of blockchain projects, BNB is struggling with a credibility challenge. Compared to other cryptos, it can incur greater volatility.
Cardano (ADA-USD)
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Hours before the opening bell on Wall Street, Cardano (ADA-USD) suffered a more volatile ride compared to other cryptos. During the last one-day period, ADA fell almost 2% of its market value. Furthermore, in the following week, Cardano fell a little over 8%. Historically, ADA has printed much uglier charts compared to many other digital assets and same theme returns.
Priced at just over 33 cents, ADA conspicuously fell below both the 50 and 200 DMAs, which effectively merged for the moment at 37 cents. In addition, the pace of the negative trajectory suggests that more downside may await. Therefore, if you must invest in crypto, you may want to consider ideas with higher probability than Cardano.
To be sure, ADA is enjoying the frame of falling volume and falling price, supposedly a bullish setup. But to reiterate, the pace of value erosion is serious, which makes me question the framework’s relevance. That said, for the bulls to regain control of Cardano, it needs to take out the 40-cent level at a minimum.
Polygon (MATIC-USD)
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Another heavy underperformer compared to other cryptos, early Monday morning, Polygon (MATIC USD) fell by just over 1% in the last 24 hours. However, the real damage came over the past week, losing almost 11% of its market value. No other digital asset in the top 10 by market capitalization saw such an erosion.
Still, there may be a modest degree of hope that MATIC can pull it together. At $1.13 a pop, Polygon fell below its 50 DMA, which stands at $1.19. On the flip side, its 200 DMA is at 94 cents, so MATIC enjoys about a 27% cushion. If the bulls can quickly come in and build support, MATIC might be able to salvage some of the volatility.
Should this be the case, bullish investors need to see Polygon building a baseline of support at $1.40, at a minimum. On paper this shouldn’t be too difficult. In February, it peaked at nearly $1.57. Of course it was a short blip. This time it has to build a bridge.
Solana (SOL-USD)
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Previously tagged as one of the Ethereum killers during the 2021 bull run, Solana (SOL USD) struggles with oxygen. Early on Monday morning, SOL had lost over 2% of its market value in the last 24 hours. And in the following week, SOL fell 9%.
To make matters worse, at the time of writing, SOL is changing hands for just under $21. Unfortunately, both its 50 and 200 DMAs converged around the $23 price point. Therefore, the first order of the day is to get back above $23. Otherwise the bears would smell blood in the water.
To be fair, Solana is printing a familiar pattern now: declining volume and falling price. Under the subject of technical analysis, this dynamic implies a weeding of weak hands. Going forward, the bulls can come into force, and drive SOL much higher.
That’s the theory. Right now, things aren’t looking too hot. At a minimum, the bulls need to see a baseline develop at $30. Otherwise, Solana can be sidelined for now as you concentrate on higher probability cryptos.
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.
