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Cryptoverse: Bitcoin beats the heat in a month of July

Cryptoverse: Bitcoin beats the heat in a month of July
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A representation of the virtual currency bitcoin and a US one-dollar bill 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 that for a while.

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

The rally matched gains in riskier assets such as stocks 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) it is now at 0.90, up from 0.41 in January, where 1 means its prices move in perfect unison.

The major cryptocurrency has been positively correlated with the Nasdaq since the end of November, unlike previous years when it routinely turned negative, meaning they moved in opposite directions.

Itai Avneri, deputy CEO of cryptocurrency trading platform INX, described July’s convergence as “good news.”

“It means that institutional investors are looking at Bitcoin like any other asset,” he said. “When the market changes, and it will, these institutions will come back and invest in cryptocurrencies.”

The gains weren’t limited to bitcoin, as the value of the global cryptocurrency market climbed back above $1.15 trillion last month, adding more than $255 billion since the end of June, data showed. from CoinGecko.

Assets under management in digital asset investment products rose 16.9% to $25.9 billion in July, reversing June’s 36.8% drop, according to research firm CryptoCompare.

However, trading has been light, indicating that many investors reckon it is too early to turn bullish in a deeply uncertain macro environment with rampant inflation, and the US and Europe eyeing the 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.

“On a medium-term horizon, we are bearish (on cryptocurrencies) despite the current bounce, this aligns with our stance on equities,” MacroHive researchers wrote on Friday, citing inflation, recession risks and rate hikes.

A LONG WAY FROM $60,000

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

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

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

On the other hand, if the United States enters a prolonged recession and the Federal Reserve is forced to cut interest rates, Bitcoin could benefit, said Russell Starr, CEO of Valor, which creates exchange-traded products for digital assets. .

“You’re going to have to see another quarter of a downturn before you see a resumption to the high $60,000 levels,” he said.

For investors who dove into crypto during its heyday at the height of pandemic-era loose monetary policy, the next few months could be quite bumpy, according to Adrian Kenny, senior sales trader at GlobalBlock.

“There is still an admittedly considerable mountain to climb in terms of ‘normalcy’ or hopes of a return to 2021 heights anytime soon.”

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Reporting from Medha Singh and Lisa Pauline Mattackal in Bangalore; Edited by Vidya Ranganathan and Pravin Char

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, according to the Trust Principles, is committed to integrity, independence and freedom from bias.

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