A depiction of bitcoin virtual currency and a US one dollar banknote are seen in front of a stock chart in this illustration taken 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 it in a while.
After months of plummeting, it jumped more than 17% in July, its best performance since October. Ether rose 57%, its biggest monthly gain since January 2021.
The rally was in line with gains in riskier assets such as equities, as investors bet economic weakness could deter the Fed from aggressively tightening monetary policy.
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Bitcoin’s 40-day correlation with the tech-focused Nasdaq (.IXIC) now sits at 0.90 – up from 0.41 in January – where 1 means their prices are moving in perfect harmony.
The major cryptocurrency has consistently been positively correlated with the Nasdaq since late November, unlike previous years when it regularly turned negative, meaning they moved in opposite directions.
Itai Avneri, deputy CEO of cryptocurrency trading platform INX, called July’s convergence “good news.”
“This means that institutional investors view bitcoin like any other asset,” he said. “When the market turns – and it will – these institutions will come back and invest in crypto.”
The gains weren’t limited to bitcoin, as the value of the global cryptocurrency market rebounded above $1.15 trillion last month, adding more than $255 billion since late June, according to data from CoinGecko.
Assets under management in digital asset investment products rose 16.9% to $25.9 billion in July, reversing June’s 36.8% decline, according to research firm CryptoCompare.
However, trading was thin – indicating that many investors believe it is too early to turn bullish in a deeply uncertain macro environment with rampant inflation, and America and Europe are eyeing a barrel of a recession, not to mention the implosion of some big crypto players. .
Average daily volumes across all digital asset investment products fell 44.6% to $122 million, the lowest since September 2020, CryptoCompare found.
“Over a medium-term horizon, we are bearish (on crypto) despite the current rebound, this aligns with our stance on equities,” MacroHive researchers wrote on Friday, citing inflation, recession risks, and downturns. rate hikes.
A LONG WAY FROM $60,000
Bitcoin is currently trading at $23,336, consolidating around the $24,000 mark after hitting that level last week.
According to Chris Terry, vice president of lending platform SmartFi, it will likely continue to trade in a tight range around $20,000, plus or minus 10% to 15%, until the trajectory of the economy is clearer.
“We could be in this stalled market for weeks and weeks.”
On the other hand, if the United States enters a prolonged recession and the Fed is forced to cut interest rates, bitcoin could benefit, said Russell Starr, CEO of Valour, which creates exchange-traded products for digital assets.
“You’re going to have to see another quarter of recession before you see a recovery to the high levels of $60,000,” he said.
For investors who got into crypto at the height of pandemic-era accommodative monetary policy, the next few months could be quite bumpy, according to Adrian Kenny, senior trader at GlobalBlock.
“There is undoubtedly still a considerable mountain to climb in terms of ‘normality’ or hope for a return to the heights of 2021 anytime soon.”
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Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Vidya Ranganathan and Pravin Char
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