Expert views on cryptocurrencies offer more than one interpretation of the current market. That’s the view I’m sure most people will have regarding recent statements from Rosie Rios, former U.S. Treasurer and a visiting scholar at Harvard University. Per a CNBC report, Rios remarked the “train has already left the station” regarding those who were thinking about investing in cryptos now.
But even Rios isn’t necessarily suggesting you can’t make profits from digital assets. However, she recommends asking basic questions, such as, “Is the product practical?” or “Is there room for growth?” before buying.
That’s a difficult proposition, since hype surrounding cryptos has always been intense. However, this methodology may have gotten a bit easier thanks to a steep correction in virtual currency pricing.
Since the early days of November, cryptos have been unable to build upon their record-breaking valuations, gradually shedding their gains. But the situation became especially pronounced in early December, when fears about the Federal Reserve shifting to more hawkish policy combined with concerns about the Covid-19 omicron variant. This sent digital assets crashing toward treacherous technical levels.
However, an argument can be made that the market has largely digested the news. Multiple cryptos have regained momentum, possibly implying the bottom has been inked.
Nevertheless, debates rage about where the sector will head in 2022. Some analysts suggest cryptos can crash next year because they offer no fundamental value. After an unprecedented rally, it wouldn’t be the most surprising of circumstances.
Then again, what makes this rally different from prior spikes in digital valuations is mainstream integration. It’s not just about the institutional players (who are fickle in the best of times) but the vast community that has risen in support of blockchain-based assets.
One thing is for sure — you’re going to want to watch these cryptos closely during this chaotic holiday season:
Virtual currencies are awfully risky, so you don’t want to venture in without serious due diligence. While the relatively low prices may be appealing to contrarians, just keep in mind buying low does not prevent you from being forced to sell even lower. Cryptos are cruelly capricious, end of discussion.
Cryptos: Bitcoin (BTC)
With Bitcoin’s 200-day moving average (DMA) set just above $47,000, the move to break above $49,000 at the time of writing was a critical one.
Since the 200-DMA represents a longer-term gauge of market health, BTC really couldn’t afford to drop any lower without potentially suffering severe consequences. But markets are all about motion, so cryptos can’t afford to rest on their laurels.
The next logical step for BTC is to hit and exceed the $53,000 level. Why this particular price point? It represents a clear demarcation line throughout this year between bullish and bearish sentiment.
Back during the early spring rally, $53,000 provided key support. In late summer, it imposed resistance. Subsequently, during the November correction, it again represented support. Thus, the breakdown in December was especially significant because it sent BTC prices below $50,000.
Naturally, I wouldn’t get too comfortable with any acquisitive behaviors toward Bitcoin until it shoots above $53,000. Ideally, I’d like to see BTC move into the high-50s range before making any big moves. Of course, you’re welcome to advantage the present discount, but another drop isn’t out of the question.
On paper, Ethereum is in a much better position than Bitcoin, sandwiched between the 50-DMA at the top and the 200-DMA below. However, its price is closer to the 50-DMA — at least, as I write these words. Therefore, investors theoretically should have greater confidence in ETH than its larger-capitalized cousin.
However, the present price of just a hair above $4,000 creates an intriguing circumstance. This year, $4,000 served as a resistance level twice — first during the spring rally in cryptos, and again in September before ETH broke an all-time record in November. Can history repeat itself in 2022?
I’m not going to discount the possibility that Ethereum can move higher while other cryptos swing lower — yes, even Bitcoin. While BTC has become a store of value and a symbol for financial resistance, Ethereum is the backbone of the blockchain economy. So long as people continue to utilize blockchain technologies, ETH cam maintain its relevance.
However, moving convincingly past the $4,000 mark will be critical for restoring confidence.
Cryptos: Binance Coin (BNB)
One of the standout cryptos of 2021, Binance Coin represents the digital asset undergirding the namesake exchange.
Thanks to the tremendous enthusiasm for virtual currencies, many investors can’t get enough — especially with altcoins. Because the Binance exchange offers so many more options than competing platforms, it’s no surprise BNB shot up to ridiculous heights.
Presently, Binance Coin finds itself in a similar situation with Ethereum. At the time-of-writing price of just under $539, it’s sitting near a critical technical threshold. The $540 level represented support for BNB during the spring rally of this year.
This price point then imposed resistance, first in September and later in October. In the latter period, BNB finally broke through before eventually succumbing to the crypto correction.
Today, it’s back at full circle, which means Binance Coin must start showing significant upside momentum to inspire confidence. Otherwise, lingering around the $540 level could attract skepticism — especially as a higher-interest-rate environment doesn’t necessarily support risk-on assets.
Another one of the cryptos that enjoyed a breakthrough performance in 2021, Solana represents the next evolution of blockchain enterprises. Rather than focusing merely on peer-to-peer transactions, Solana forwarded the proof-of-history protocol. It vastly improves security and scalability for decentralized platforms. Thus, as the number of blockchain-based applications increase, Solana may enjoy more fundamental relevance in the years ahead.
Nevertheless, investors must be aware that market dynamics might not always correlate with the underlying fundamentals. Frankly, quite a few of the Johnny-come-latelys probably don’t have a care in the world about decentralized initiatives. Rather, they just want to make money. That’s not a knock against Solana, but rather a circumstance that affects all cryptos.
Technically, Solana finds itself in an interesting position. At $183, it’s a bit shy of the $200 level that acted as both resistance during this year’s late-summer rally and support during the November selloff. Of course, SOL broke down in December before swinging back higher to its current level.
To have confidence in Solana, though, a move to and above $200 is necessary. Otherwise, SOL presents big risks at this ambiguous juncture.
Cryptos: Cardano (ADA)
One of the “classic” altcoins, Cardano enjoyed a banner year in 2021. Despite a sharp correction from the fallout in cryptos, ADA coins maintain a strong profile, up 638% on a year-to-date basis.
Still, it’s been a rough ride against a more recent framework. During the trailing month, Cardano has shed 25% of value.
After holding onto the $2 level for some time, seeing it back around $1.33 is a disappointment. Not surprisingly, ADA is also one of the weaker cryptos relative to traditional analytical benchmarks.
Mainly, the coin is conspicuously below its 50- and 200-DMAs. As well, the 50-DMA has crossed below the 200-DMA, which typically indicates bears have firm control of the market.
Given how volatile cryptos are, it wouldn’t be wise to completely write off Cardano. However, ADA needs to show upside momentum right here, right now. The $1.45 level is the support/resistance line to watch, as it has represented a demarcation line between optimism and pessimism. That ADA is trading below this point is hardly encouraging.
One of the most controversial cryptos, XRP finds itself embroiled in a lawsuit. As you know, the Securities and Exchange Commission (SEC) filed suit against Ripple Labs, the founder of the XRP coin, alleging it used the distribution of cryptos to sidestep securities laws. In fact, as I write this on Dec. 22, it’s the one-year anniversary of the lawsuit.
Congratulations, I guess?
Seriously, though, InvestorPlace contributor Mark R. Hake may have some positive news: a bias lawsuit against the SEC could help XRP. “According to the lawsuit, [SEC officials] had conflicts of interest while declaring digital assets like XRP crypto as securities … They declared others like Ethereum (ETH) as non-securities, based on a conflict of interest.”
However, banking on the results of lawsuits — or in this case, the result of one lawsuit to affect another — is risky business. As things stand technically, XRP is in an ambiguous situation. While it’s enjoyed decent momentum given the circumstances, it’s also trading beneath its 50- and 200-DMAs. Only gamblers should consider a buy right now.
Cryptos: Terra (LUNA)
If there’s one crypto that’s really not feeling the pain, it’s LUNA, which undergirds the Terra blockchain project. Over the trailing week, the coin is up 52%, a blistering performance when so many other cryptos are barely holding on. Much of this positive sentiment could be due to how distinct the network is.
Per CoinMarketCap, “Terra is a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.”
Of course, the central irony about Terra is that, while it was designed to combine the benefits of decentralized and centralized protocols to stabilize the usually-wild crypto segment, LUNA itself has been unstable. However, since it’s unstable in the positive direction, proponents aren’t exactly complaining.
Personally, I’m hesitant to wager on LUNA at this juncture. Cryptos that have broken away from correlation with Bitcoin tend to fall back in line. However, I’m not opposed to the idea of throwing a little speculation money into it, just to see what happens.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA and XRP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.