Cryptoverse: Bitcoin Breaks Heat in July Jump

A representation of the virtual currency bitcoin and US dollar notes is shown in front of a stock chart in this illustration taken on January 8, 2021. REUTERS/Dado Ruvic

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Aug 2 (Reuters) – It’s been a good month for bitcoin – and we haven’t said that in a while.

After months of free fall, it jumped more than 17% in July, its best performance since October. Ether rose 57 percent, its strongest monthly gain since January 2021.

The rally coincided with gains in riskier assets such as stocks as investors bet that economic weakness could deter the Fed from aggressively tightening monetary policy.

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Bitcoin’s 40-day correlation to the technology-focused Nasdaq (.IXIC) index now stands at 0.90 – up from 0.41 in January – where 1 means its prices are moving perfectly.

The leading cryptocurrency has been positively correlated with the Nasdaq since late November, unlike in previous years where it would routinely turn negative, meaning it moved in opposite directions.

Itay Avnery, executive vice president of crypto exchange INX, described the July convergence as “good news.”

“This means that institutional investors look at bitcoin like any other asset,” he said. “When the market turns — and it will — these institutions will come back and invest in crypto.”

CoinGecko data showed that gains were not limited to Bitcoin, as the value of the global cryptocurrency market soared to over $1.15 trillion last month, adding more than $255 billion since the end of June.

AUMs in digital asset investment products rose 16.9% to $25.9 billion in July, reversing a June decline of 36.8%, according to research firm CryptoCompare.

However, trading was thin – suggesting that a lot of investors gauge that it is too early to turn bullish on a very uncertain macro backdrop as inflation rages, America and Europe stare into the barrel of recession, not to mention the collapse of some of the big crypto players. .

Average daily volumes across all digital asset investment products fell 44.6% to $122 million, the lowest since September 2020, according to CryptoCompare.

“On the medium-term horizon, we are bearish (on crypto) despite the current bounce, which is in line with our stance on equities,” researchers at MacroHive wrote Friday, citing inflation, recession risks and rate hikes.

Long road starts at $60,000

Bitcoin is currently trading at $23,336, consolidating around the $24,000 mark after touching that level last week.

Trading is likely to continue in a narrow range of around $20,000, plus or minus 10% to 15%, until there is more clarity about the trajectory of the economy, according to Chris Terry, vice president at lending platform SmartFi.

“We could be in this faltering market for weeks and weeks.”

On the flip side, if the US enters a prolonged recession and the Fed is forced to cut interest rates, bitcoin could benefit, said Russell Starr, CEO of Valor, which creates exchange-traded products for digital assets.

“You will have to go through another quarter of recession before you see a resumption of a return to the highs of $60,000,” he said.

For investors who plunged into cryptocurrency during its rise at the height of pandemic-era easy monetary policy, the next several months could be very bumpy, according to Adrian Kenny, chief sales trader at GlobalBlock.

“There is undoubtedly a great mountain still to climb in terms of ‘normality’ or hopes of returning to highs in 2021 anytime soon.”

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Additional reporting by Medha Singh and Lisa Pauline Matakal in Bengaluru; Editing by Vidya Ranganathan and Praveen Shar

Our Standards: Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News Agency, which is committed under the principles of trust to impartiality, independence and freedom from bias.

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