In this Jan. 8, 2021, illustration, an image of the virtual currency bitcoin and a US dollar bill are seen in front of a stock chart. REUTERS/Dado Ruvic
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August 2 (Reuters) – It’s been a good month for Bitcoin – and we haven’t said that in a while.
After months of freefall, July jumped more than 17%, its best performance since October. Ether is up 57%, its strongest monthly gain since January 2021.
The rally was in step with gains in riskier assets such as stocks as investors believed economic weakness could deter the Fed from aggressively tightening monetary policy.
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Bitcoin’s 40-day correlation with tech-based Nasdaq (.IXIC) It’s now at 0.90, up from 0.41 in January – where 1 means their prices are moving perfectly.
Unlike previous years, the leading cryptocurrency has had a consistently positive correlation with the Nasdaq since the end of November, indicating that it regularly turns negative, meaning it moves in opposite directions.
Itai Avneri, deputy CEO at cryptocurrency trading platform INX, described the approach of July as “good news.”
“This means that institutional investors are looking at bitcoin like any other asset. “When the market turns — and it will — these institutions will come back and invest in cryptocurrency.”
According to data from CoinGecko, the global cryptocurrency market was worth more than $1.15 trillion last month, and gains have not been limited to bitcoin, as it has added more than $255 billion since the end of June.
Assets under management in digital asset investment products rose 16.9% to $25.9 billion in July, reversing a 36.8% decline in June, according to research firm CryptoCompare.
However, trading has been weak – suggesting it is too early for many investors to be bullish on a deeply uncertain macro backdrop with broad inflation and America Europe staring down the barrel of recession, not to mention the implosion of some major crypto players.
CryptoCompare estimates that average daily volumes across all digital asset investment products fell 44.6% to $122 million, the lowest since September 2020.
“Over the medium term, despite the current bounce, we are bearish (on crypto), which is consistent with our position on equities,” MacroHive researchers said on Friday, citing inflation, recession risks and interest rate hikes.
A LONG WAY OVER $60,000
Bitcoin is currently trading at $23,336 and is consolidating around $24,000 after hitting that level last week.
Until there’s more clarity on the economy’s trajectory, it’s likely to trade in a tight range of around $20,000, plus or minus 10% to 15%, according to Chris Terry, vice president of lending platform SmartFi. will continue.
“We could be in this stagnant market for weeks and weeks.”
On the other hand, bitcoin could benefit if the U.S. enters a prolonged recession and the Fed is forced to cut interest rates, said Russell Starr, CEO of Valor, which creates exchange-traded products for digital assets.
“You’d have to see another quarter of a recession before you see a recovery to the high $60,000s,” he said.
According to Adrian Kenny, GlobalBlock’s chief sales trader, the next few months could be quite difficult for investors who got into cryptocurrency during the boom at the height of easy monetary policy during the pandemic.
“There is certainly still a significant mountain to climb in terms of hopes of ‘normalcy’ or an early return to the highs of 2021.”
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Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Edited by Vidya Ranganathan and Pravin Char
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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias in accordance with its Principles of Trust.
