After months of not-so-encouraging results, bitcoin cryptocurrency made a strong come back this July, netting a 17% performance rating according to Nasdaq, the second-largest stock exchange in the world. This is by far bitcoin’s best performance to date since October last year.
Ether also rose to 57 percent, its strongest monthly gain since January 2021.
The rally was in step with gains in riskier assets, such as stocks, with some investors betting that economic weakness could deter the Fed from aggressively tightening monetary policy.
Bitcoin’s 40-day correlation to the tech-focused Nasdaq now stands at 0.90, up from 0.41 in January last year, which means upward movement by .49. A score of 1 means their prices move in perfect lockstep.
“It’s been a good month for bitcoin,” said Itai Avneri, deputy CEO at cryptocurrency trading platform INX. He went on to describe July’s convergence as positive news, saying, “It means institutional investors are looking at bitcoin like any other assets. When the market turns, and it will turn, these institutions will then come back and invest in crypto.”
The leading cryptocurrency has also been consistently positively correlated with the Nasdaq since late November, unlike in the previous years where it would routinely turn negative — meaning, they moved in opposite directions.
Other cryptocurrencies also make a move
CoinGecko data showed that gains were not limited to bitcoin, as the value of the global cryptocurrency market crept back above the $1.15 trillion threshold last month, adding over $255 billion since the end of June.
Another research firm, CryptoCompare, noted that assets under management in digital asset investment products rose 16.9 percent to $25.9 billion in July, reversing June’s decline of 36.8 percent.
Trading, however, has remained thin. This indicates that plenty of investors are thinking that it is still too early to turn bullish in a deeply uncertain macro backdrop where inflation is rampant. Both America and Europe are now also staring at 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 by 44.6 percent to $122 million, the lowest since September 2020, CryptoCompare reported.
Bitcoin is currently trading at $23,336 and has consolidated that figure around the $24,000 mark just days after touching that level last week.
According to Chris Terry, vice-president at lending platform SmartFi, it would likely continue to trade at around $20,000, plus or minus 10 percent to 15 percent, until there is more clarity over the economy’s trajectory. “We could be in this stalled market for weeks and weeks,” he said.
“On the flip side, if the US enters a prolonged recessionary period 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 resumption back up to the lofty $60,000 levels,” he added.