After their recent rise, cryptos are operating at a tentative standstill. The market is anxiously awaiting the Federal Reserve’s decision on interest rate hikes. While a hike could send digital currencies spiraling into volatility, a no-change stance, though expected, might not be the boon cryptos hope for.
Dwindling trading volumes hint at potential unease among retail investors. This sentiment was mirrored on Monday with Wall Street’s unusual options activity for consumer goods giants. Such patterns often signal caution and could spell turbulence for risk-fueled assets like cryptos.
In other words, what’s good news for relatively safe investments may spell bad news for emotionally driven ideas. As traders brace for possible market volatility, cryptos are once again thrust into the spotlight with their every move under scrutiny.
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On the unpredictable rollercoaster ride that is the cryptocurrency market, Bitcoin (BTC-USD) recently gave investors a fleeting moment of optimism.
On Monday, it momentarily towered above the significant $27,000 mark, an encouraging sign, especially when considering the underwhelming performance of BTC and its crypto peers since about mid-August. By Tuesday, however, Bitcoin retraced a bit of that progress, but let’s not overlook its commendable 4% growth over the preceding week.
However, optimism must be paired with a dose of reality. Currently oscillating just below $26,900, Bitcoin is trading slightly beneath its 50-day moving average ($27,190.23). Further emphasizing its challenges, the 200-day moving average has climbed to $27,759. The bulls, predictably, have their sights set on surpassing these barriers.
But here lies the conundrum: trading volumes have significantly dwindled from prior highs, indicating waning investor enthusiasm. With the prevailing sentiment seemingly leaning away from riskier ventures towards more stable prospects, it’s paramount for investors to exercise caution when navigating the intricate realm of Bitcoin and its cryptocurrency brethren.
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Amid the dynamic tapestry of the cryptos market, Ethereum (ETH-USD) — the world’s second-largest cryptocurrency by market capitalization — has been carving out its own narrative.
Just this Monday, ETH teased enthusiasts with a brush against the $1,700 threshold. Although it’s since recalibrated to a steadier $1,637, the past week did see it register a growth of a bit over 3%. But, like its counterparts in the cryptos realm, Ethereum is on the lookout for catalysts to propel it upwards.
Technical indicators, however, hint that this awaited boost should manifest soon. Ethereum’s present position on the charts sees it skirting beneath its 50-day moving average ($1,707) and notably below its 200 DMA ($1,800). While these aren’t insurmountable barriers, the overarching sentiment has become notably risk-averse toward cryptos.
The precipitous drop in trading volume compared to earlier highs this year further accentuates this sentiment. As it stands, banking on a resurgence of retail interest in ETH appears a gamble, especially given the current favoritism institutional investors show toward consumer goods stocks. Ethereum’s pathway, in this context, is fraught with uncertainties.
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In the kaleidoscopic world of cryptos, Tether (USDT-USD) occupies a distinctive niche. This stablecoin, typically pegged to traditional currencies like the dollar, serves less as a vehicle for capital gains and more as a beacon for wealth preservation within the blockchain.
Instead of being lured by the tumultuous highs and lows of other cryptos, investors pivot to Tether for its conveniences. It allows them to maintain their dollar-equivalent wealth in the cryptos ecosystem, eliminating the hurdles of fiat-to-crypto conversion.
However, there have been recent hiccups. In preceding weeks, Tether momentarily faltered on its 1:1 peg, trading at a disconcerting discount. Such fluctuations rendered excessive USDT exposure counterintuitive, especially amid a deflationary backdrop for cryptos.
Presently, Tether has regained its 1:1 peg, a reassuring sign. Yet caution remains the watchword. Trading volumes for USDT are on the decline, echoing a broader trend among cryptos. While a complete collapse might seem far-fetched, in the unpredictable domain of cryptos, every potentiality warrants attention.
When it comes to exemplifying the capricious temperament inherent to the world of cryptos, XRP (XRP-USD) undeniably clinches a spot at the top. Spawned by Ripple Labs, XRP emerged as a pioneering altcoin, championing the cause of swift cross-border transactions. Its unique blockchain design aptly catered to microtransactions, giving it a distinct edge.
But its ascent didn’t go unnoticed. The U.S. Securities and Exchange Commission (SEC) cast a wary eye on XRP’s burgeoning popularity, culminating in a lawsuit against Ripple Labs. However, the litigation witnessed a turning point when the overseeing federal judge ruled that XRP’s sales didn’t classify as securities. Predictably, this sparked a jubilant rally, though it was short-lived.
Now, XRP finds itself at a crossroads. With a value just shy of 51 cents, it treads beneath its 200-day moving average. Moreover, the 50 DMA stands poised at 55 cents, implying that a decisive upward movement is imperative to bolster investor faith. But a recurring theme with cryptos surfaces here again — diminished trading volume compared to yesteryears. Proceed with caution when charting the waters of XRP.
For those who thrive on the thrill of attempting to catch the proverbial falling knife, Cardano (ADA-USD) beckons enticingly. However, investors with a low tolerance for volatility might want to give this one a wide berth.
Regarded as one of the riskier bets within the cryptos spectrum, Cardano paradoxically stands out as one of the recent commendable performers. In just a day, ADA appreciated over 2% in market value, and the past week has witnessed nearly a 4% surge. Presently, its market cap hovers tantalizingly below the $9 billion mark.
Yet, the broader context paints a different picture. Pegged at 26 cents, ADA is trailing behind its 50 DMA set at 27 cents. The more distant 200 DMA looms at 33 cents. In stark contrast to other cryptos that have recorded substantial year-to-date gains, Cardano’s modest 2% increment isn’t a confidence booster.
Echoing the pervasive trend seen across the cryptos domain, trading volume for Cardano too has seen a downturn from its earlier highs. The significance of this decline is especially pronounced for ADA, warranting heightened vigilance among blockchain aficionados.
In the ever-evolving realm of cryptos, new entrants vying for a coveted spot among the top contenders isn’t a rare phenomenon. Toncoin (TON-USD) is one such newbie that’s managed to clinch a spot within the top 10 cryptos by market cap, boasting a valuation of $8.38 billion.
As of now, this establishes TON as the ninth most treasured digital asset on the market. Yet, a nagging question persists: is this meteoric ascent here to stay?
Over the past week, Toncoin’s trajectory was nothing short of impressive, amassing a staggering 45% gain. This surge outpaces any other crypto within the top 50. Coupled with a nearly 5% rise within a mere 24-hour window, TON’s momentum is palpable.
However, there’s a caveat. TON’s rally, although impressive, unfolded against a backdrop of disconcertingly low trading volumes. With volumes dwindling since the year’s inception, skepticism about the sustainability of this rally isn’t unfounded.
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The enigmatic world of cryptos never ceases to surprise. Solana (SOL-USD), despite its position at the tail end of the top 10 cryptos in terms of market cap, is no underdog. Just look at its market cap of $8.17 billion.
Yet, rewind to a week ago and its prospects were starkly different. SOL’s pricing danced around the $18 mark, a far cry from its mid-July valuation of approximately $27. In such a backdrop, a bullish rally was imperative.
As of now, Solana is nudging the $19.83 mark. The catch? Both its 50-day and 200-day moving averages lurk close by, at roughly $21.21. While a 7% rise post an 11% weekly gain might seem plausible, the challenge is intensified by the overarching declining trading volume and the market’s growing aversion to high-risk assets.
In such a climate, even the most promising of cryptos should be approached with caution.
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.
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.
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