It wasn’t long ago that sentiment in the cryptocurrency sector – along with other risky asset classes – improved in anticipation of a Federal Reserve shift toward more accommodative monetary policy. However, May’s jobs report came in hotter than expected, dashing hopes of the central bank cutting borrowing costs. Combined with other headwinds, cryptos have struggled to gain momentum recently.
Things are really bad because the virtual currency complex offers some significant bright spots. For example, Australia’s largest exchange approved its first spot crypto exchange-traded fund (ETF). The ETF will begin trading on June 20th. In general, it is encouraging that bulls have consistently kept the market value of all cryptos above the $2.2 trillion mark.
Unfortunately for those who prefer risk-on ideas, recent Fed rumors suggest that policymakers are hesitant to adopt a dovish monetary policy framework. If there is an interest rate cut this year, it may only happen once. That’s not what digital asset investors want to hear.
Still, the sector is incredibly resilient. Let’s break down what’s in store for cryptos this week.
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Bitcoin (BTC USD)
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With Bitcoin (BTC USD) lost the psychological benchmark of $70,000 and failed to maintain certain technical levels, the circumstances do not look particularly favorable for the original blockchain asset. In the 24 hours since late Monday night, BTC lost more than 1% of its market value. It is down almost 4% in the last seven days.
Looking at the charts, Bitcoin honestly faces a treacherous outlook in the short term. Given the recent volatility, the virtual currency is trading well below its 50-day moving average, a key barometer of near-term market health. Additionally, BTC is more than 3% below its 20-day exponential moving average (EMA), another key level that gauges short-term sentiment.
Is there a positive story here? It is possible that Bitcoin is in the final stages of displaying a round bottom pattern. You can clearly see that a peak to trough pattern emerges between March and early May. There is speculation that another peak will be reached that will give BTC and other cryptos a boost.
Given the resilience of the blockchain ecosystem, this would not be out of the question. Nevertheless, the recent decline in volume metrics represents a dynamic that needs to be monitored closely.
Ethereum (ETH-USD)
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Given that Bitcoin is sending cryptocurrencies lower, this is no surprise ether (ETH-USD) has been subject to significant volatility. In the last 24 hours, ETH lost almost 5% of its market value. Over the last seven days, red ink has been about the same – 5% less. Currently, the digital asset’s market cap is $419.4 billion.
Like its No. 1 counterpart, Ethereum needs to show upward momentum quickly to avoid short-term technical damage. The price is currently above the 50-day moving average. Again, investors will be keeping a close eye on this level as a barometer of near-term market health. Any weakness from here on out could trigger a reactionary sell-off among weak hands.
There is some positive news and that is the possibility of the bottom rounding pattern mentioned above coming to pass. Similar to Bitcoin, Ethereum experienced a peak price in March, which then plummeted until mid-May. From there, the bulls are trying to reverse the trend.
It would be easier to believe in the bullish narrative, but recent volatility is a distraction. That and the recent slowing volume doesn’t do much good.
Tether (USDT-USD)
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Due to the status of Connection (USDT-USD) as a stablecoin – or digital asset pegged to a fiat currency – some investors may overlook the asset in terms of analysis. Generally, people do not try to extract capital gains from it due to USDT’s limited movement ability. But it’s actually moving: it’s not a perfect peg to the dollar.
This dynamic provides a powerful framework that crypto investors can use to their advantage. Whenever Tether rises above its peg, meaning USDT tokens are worth more than their dollar units, sentiment could be positive for cryptos. On the other hand, if Tether falls below its minimum limit, it could indicate pessimism or at least skepticism towards virtual currencies.
Interestingly, USDT has been below its peg to the US dollar for much of the past seven days. Since Monday evening, Tether bulls have been trying to push the token to parity and beyond. However, price performance has been incredibly volatile.
Ideally, investors want to see a steadily increasing value of USDT relative to the dollar. However, the ratio was volatile and net negative, which warrants caution.
BNB (BNB-USD)
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Despite its status as one of the most popular altcoins or alternative cryptos, BNB (BNB-USD), which is the digital asset associated with the Binance The stock market faces significant technical challenges in the short term. In the last 24 hours, BNB is down around 2%. Furthermore, it has fallen by more than 4% in the last week. However, the technical profile is crucial here.
Late on Monday evening, BNB was trading at around $595. This puts the blockchain asset just below its 50-DMA. As a short-term barometer of market health, this is again problematic. Typically, the 50-DMA acts as a support line. At the moment it is acting as upward resistance. Furthermore, the coin is well below its 20-day EMA, which is above $619.
On the positive side of the sentiment spectrum, BNB has been steadily rising since the March 19 session. Unfortunately, the aforementioned drop below the 50-day line threatens to reverse this positive trend. In addition, slowly decreasing volume levels hardly contribute to safety.
At the same time, BNB can rise, as we saw earlier this month. So BNB is in wait-and-see mode.
Solana (SOL-USD)
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Another incredibly popular altcoin, Solana (SOL USD) really came to life during last year’s Uptober seasonality cycle. At prices around the $20 mark, the price ultimately shot up tenfold. However, SOL struggled to maintain the $200 mark. In the last 24 hours, SOL has fallen by more than 8%. Over the last week there has been over 13% cratering.
Not surprisingly, Solana desperately needs to find technical momentum. Unlike other cryptocurrencies, SOL is well below its 50-day moving average due to the downward movement in its price. In fact, the blockchain asset briefly fell below its 200-DMA on an intraday basis on Monday. This is dangerous. If the virtual currency falls below this level, it could easily correct into double digits.
Given the natural resilience of cryptos and the increased prominence of major altcoins, I have a feeling that bulls will try to push the price above the $140 level. Solana is already near this support level, making $140 a natural target.
However, if such a move comes to pass, it must be done quickly. One of the risk factors to be aware of is the drop in volume that has affected many other cryptocurrencies.
XRP (XRP-USD)
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Representing one of the curiosities in the virtual currency space: XRP (XRP USD) has long frustrated investors, including hardcore crypto advocates. Seemingly wandering aimlessly, XRP refuses to rise above key technical levels. However, it has been one of the best-performing digital assets over the past week, gaining about half a percent. The increase of about the same magnitude has also been recorded in the last 24 hours.
Of course, this is no reason to be overly enthusiastic. Currently, XRP is trading 49 cents below its 20-day EMA (which is at 50 cents). Additionally, at 51 cents, it is well below its 50-day moving average. Before the June 7 selloff that unsettled XRP investors, the coin was slowly approaching the 53 cent mark.
For XRP to regain credibility, it needs to rise above 53 cents. From then on, the 61 cent level is crucial. This level roughly represented the highs before the April 12-13 session rocked sentiment.
Given the resilience of cryptos, it might not be wise to pass up on XRP now. Still, the blockchain asset has truly become a show-me investment.
Toncoin (TON-USD)
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As you can see, sentiment towards cryptos has been nothing short of gloomy over the past week. What makes matters worse is that among the 100 largest virtual currencies by market capitalization, only a handful of blockchain assets have posted positive returns over the past seven days. One of these tokens is Toncoin (TON USD).
In the last seven days, TON has gained about 8% of market value. To be fair, the digital asset is no exception to short-term volatility. It has fallen by more than 4% in the last 24 hours. And like some of the other major cryptos, TON is at risk of significant technical damage if it doesn’t gain momentum soon.
Looking at the chart, Toncoin had a clear horizontal support line at $7.75. Unfortunately, recent price action has pushed the asset below this point. From a market sentiment perspective, TON needs to get back to this level quickly. Otherwise, the $7.75 level would become a resistance barrier, which would further challenge the bulls in a depressed environment.
For those considering TON: I would wait. The recent volatility looks ugly and bulls need to show something substantial to justify the risk.
At the time of publication: Josh Enomoto held a LONG position in BTC, ETH, USDT and XRP. The opinions expressed in this article are those of the author, subject to those of InvestorPlace.com Publishing Guidelines.