After dropping below the critical $30,000 threshold on more than one occasion between June through July, some of the anxious holders of Bitcoin (CCC:BTC-USD) and other cryptocurrencies may have decided that enough was enough. But as has become frustratingly typical of cryptos, sometimes flirting with disaster is all you need to wake up the bulls.
Following a quick reclamation of the $30,000 mark, followed by a speedy bounce above $40,000, Bitcoin entered a much more contested route to the obvious upside target of $50,000. Incredibly, BTC did just that, securing the threshold and then some. In turn, other alternative cryptos or altcoins tagged along for the ride, setting multi-month (or in some cases all-time) record highs.
But since peaking recently on Aug. 23, Bitcoin has been somewhat disappointing. Rather than building on momentum and moving toward the $60,000 mark, BTC instead slipped below $50,000. At the moment, BTC is trading a few hundred bucks above $47,000. To be completely fair, by the time you read this, we could be talking about an entirely different paradigm. As I said, cryptos can soar on anything — positive news, rumors or even no news at all.
However, what’s intriguing about this present circumstance is that many alternative cryptos have yet to follow Bitcoin downward. On one hand, this resilient diversity is exactly what many proponents of virtual currencies have been waiting for. It’s difficult to trust cryptos as a whole when nearly everything is directly correlated with the BTC price.
At the same time, history teaches us that disconnects between Bitcoin and other digital assets don’t stay that way indefinitely. Case in point was the last blockchain bull run, which saw some altcoins hit record highs in January 2018 as opposed to December 2017.
Therefore, approach these cryptos with an understanding of the risks involved:
When assessing these and any other cryptos, pay attention not only to price trends but volume. Generally speaking, you want to see price-volume confirmation: as the price moves higher, so should volume. If not, you want to take extra precautions and perform additional due diligence.
Cryptos to Watch: Ethereum (ETH)
For years the number two among cryptos by market capitalization, Ethereum is leading the charge for major digital assets not following Bitcoin’s recent corrective trend. Over the trailing seven days, ETH is up nearly 11% while BTC is down 2.2%.
Again, no one should get carried away since we’re talking about cryptos here. At any moment, the circumstance could flip or ping any number of possible scenarios.
Nevertheless, it’s an intriguing circumstance because we’ve seen this quite a few times before. As alluded to earlier, in the last bull run in cryptos, Bitcoin hit peak valuation in December 2017, whereas Ethereum did so in January the following year. More recently, BTC hit its record in April of this year, whereas ETH secured its high a month later.
While it’s encouraging to see cryptos not always correlate with Bitcoin, the reality is that whatever happens to BTC, it ends up filtering down to the altcoins. Given that recent accumulation (buy) volume is off by roughly two-thirds that seen in May, I would approach Ethereum very cautiously at these levels.
If I had to pick what is the blockchain asset of the hour, it would be Cardano. Seemingly on all levels, Cardano has become one of the most relevant cryptos. On a fundamental level, the decentralized initiative garnered intense interest because of its proof-of-stake (PoS) protocol, basically a mining methodology that emphasizes network stake over computing power.
And of course, we all know about ADA’s market pricing dynamics. At the beginning of this year, Cardano coins were trading hands for around 18 cents a pop. During the remarkable spring rally, ADA reached a height of approximately $2.46. Following the sharp correction in cryptos, the altcoin again joined in on the fun.
But what happened next was unlike anything we’ve seen in its major crypto counterparts, hitting an all-time high of just under $3. The extreme bullishness sets up an intriguing question: can Cardano move higher still?
It’s a tricky one to answer, because when ADA made its blistering record run, the volume level — while elevated — was still down about halfway from the accumulation heights we saw back in the spring. Still, there are those who believe that Cardano could make for a distinct bull case.
Cryptos to Watch: XRP (XRP)
Although unparalleled in their groundbreaking innovations, cryptos have always faced the dark cloud of government regulation. No matter how decentralized a blockchain asset is, if the government decides to crack down, there’s not a whole lot of recourse that investors can bank on.
Government agencies likely cannot do a single thing about trading in cryptos — that cat is well out of the bag. However, what they can do is to ban the transaction process between government-backed fiat currencies and digital assets. It’s the old “if a tree falls but no one is around to hear it, will it make a sound?” argument but for cryptos.
Unfortunately, holders of XRP — colloquially known as Ripple coins — got a taste of the regulatory pain when the Securities and Exchange Commission charged issuer Ripple Labs with deliberately skirting securities laws.
However, an upcoming hearing could be “very important because Ripple could potentially get some documents that could really help it advance its position that ‘XRP is like Ether and in 2018 the SEC said Ether is not a security and therefore XRP is not a security,’” according to legal expert and attorney Jeremy Hogan.
If so, XRP could make a surprise comeback.
The meme that refuses to die, I don’t think you’ll find too many people who are on the fence regarding Dogecoin. Even among hardcore advocates of cryptos, you’re not going to find 100% consensus regarding DOGE. As a personal example, my Blockster article on the meme crypto garnered tremendous interest and praise despite its cautionary take.
Now, despite the less-than-generous criticisms I receive online, I’m a facts guy — no really, I am, or at least I do my best to be! No matter how crazy the Dogecoin phenomenon appears to be (even when stacked up against the wild cryptos market), DOGE has been impressive. I mean, if this were the equities sector, I’d have a hard time imagining a DOGE-equivalent would stay alive this long.
Adding to the speculative interest, DOGE is currently trading above its 50- and 200-day moving averages — key barometers of near-term and longer-term strength, respectively.
Nevertheless, I’d watch the volume level, which on the whole has been declining conspicuously since late January of this year.
Cryptos to Watch: Solana (SOL)
It’s time to mix things up with Solana, a cryptocurrency that, if memory serves correct, I have never discussed before on any publication. CoinMarketCap‘s description of Solana describes it as “a highly functional open source project that banks on blockchain technology’s permissionless nature to provide decentralized finance (DeFi) solutions.”
As is often the case when people throw blockchain magic words at people unfamiliar with decentralized protocols, their eyes glaze over. Step away from the lexicon, though, and DeFi solutions — such as that forwarded by Solana — offer a potential key to the democratization of finance.
For example, one of the most compelling uses of DeFi applications is the introduction of automated market makers (AMMs). Rather than market professionals providing liquidity in major exchanges like the Nasdaq or the New York Stock Exchange, it’s possible to open this liquidity provision function to anyone with the funds and the interest to do so.
This type of participatory finance is probably the primary reason why Solana coins have exploded higher in 2021. While I’m not a big fan of buying cryptos at record-high levels — volume data reveals a heavily overbought backdrop — this is one to keep your eye on for potential discounts down the road.
As groundbreaking as the blockchain technology is, its ultimate mainstream integration will be hampered if the interactions always occur within decentralized silos. In other words, unless blockchain-based protocols can utilize data from off-chain sources, the underlying industry will be effectively insulated from innovations outside decentralized networks. And that’s exactly why Chainlink came along. CoinMarketCap describes what makes Chainlink unique:
“Chainlink is one of the first networks to allow the integration of off-chain data into smart contracts. With many trusted partners, Chainlink is one of the major players in the data processing field. Due to the integration of off-chain data, Chainlink has attracted the attention of numerous trusted data providers, including Brave New Coin, Alpha Vantage and Huobi. Data providers can sell access to data directly to Chainlink, thus monetizing the information they have.”
By connecting events that occur outside the blockchain to verify smart contracts, Chainlink can exponentially expand the underlying technology’s applicable reach. After falling below $14 in the most recent correction, LINK is back on the run again.
Over the past several days, we’ve seen intense accumulation volume build up for Chainlink, which is obviously encouraging for the token. In the last day, LINK has broken above its 200-day moving average, offering confirmation of continued optimism.
Cryptos to Watch: Uniswap (UNI)
Finally, one of the cryptos that was seemingly left for dead, Uniswap has made a huge comeback. At time of writing, the UNI token is swapping ownership at approximately $30.50 per unit, more than doubling from its July 20 session. More importantly, Uniswap’s current price tag is noticeably above its 200- and 50-day moving averages, implying a building of support.
It’s been a dramatic turnaround for the token in a period lasting less than a month-and-a-half. At one point, UNI was trading below $15, having fallen more than 66% from its early May highs. That was also well below the peak’s 38.2% Fibonacci retracement level, which would ordinarily justify serious concern.
Moving forward, though, there might be a somewhat decent chance that Uniswap can work out of its current range and challenge its prior highs. With the underlying network’s focus on automated trading through DeFi applications, Uniswap caters strongly to the burgeoning democratization of finance movement. Also, volume trends have been relatively stable since roughly mid-March, implying that additional support could boost UNI to fresh plateaus.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, ADA, XRP, DOGE, LINK and UNI. 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.