First Mover: July Was a Runaway Month for Crypto Returns
Crypto traders didnât need to work too hard to make money last month. They just had to be in the market.Â
Every digital asset in the CoinDesk 20 ended the month in the black. Bitcoin benefited from bets against the U.S. dollar while ether, the native cryptocurrency of the Ethereum blockchain, gained from speculation over the future of âdecentralized finance,â known as DeFi.
BitcoinÂ rose 24% during the month, its best July in eight years, and was changing hands as of late Sunday at around $11,100 â even after a flash crash earlier in the day that saw the price plunge about $1,400 in a matter of minutes.
TheÂ largest cryptocurrency by market value continues to benefit alongside gold as the ongoingÂ economic toll of the coronavirus raises expectations of further rescue packages and stimulus from central banks and governments.Â Gold, seen by many investors in traditional marketsÂ as a hedge against inflation, has been hitting newÂ records and on Sunday was closing in onÂ $2,000 an ounce.
The credit-rating firm Fitch on FridayÂ placed a ânegative outlookâ on the United Statesâ triple-A rating, writing in a press releaseÂ that a âresurgence of inflationâ could force the Federal Reserve to raise interest rates, âadversely affecting debt dynamics.âÂ
âPaper money hit a low versus non-quantitatively-easible money like gold and bitcoin,âÂ Dan Morehead, CEO of the cryptocurrency investment firm Pantera Capital,Â wrote last week in a monthly letter. Â
Bitcoin is now up 56% on the year, vastly outperforming the Standard & Poorâs 500 Index, which is upÂ 1.3% in 2020. The gauge of U.S. stocks roseÂ 5.5% in July.Â
Ether, the second-biggest cryptocurrency by market value, jumped 54% in July and is now trading around $380, its highest in two years. Ethereum has become theÂ blockchain of choiceÂ for most of the biggest projects in DeFi, whereÂ decentralized lending and trading systems have now garnered someÂ $4.2 billion in total value locked,Â quadrupleÂ the amount just two months earlier.Â
âAll this hype surrounding DeFi has further fueled Ethereumâs rise,â Jay Hao, CEO of the cryptocurrency exchange OKEx, wrote last week, noting that trading volumes had jumped on decentralized exchanges.Â
âEven if the DeFi bubble were to burst, it seems that it cannot quell the enthusiasm for ether,â Hao wrote. âIn actual fact, it may bolster its price further as the capital flows from DeFi tokens back into ether.â
Julyâs top-performing digital asset, Chainlinkâs LINK token, surged 70%.
AsÂ CoinDesk Senior Markets Reporter Daniel CawreyÂ detailed in First Mover on Friday, LINK represents the leading âoracleâ â an automated price feed â for many DeFi applications built atop the Ethereum blockchain. And the role is potentially so lucrative that many other projects are now vying to grab market share in the oracle race.Â
Itâs somewhat ironic, since the outstanding amount of stablecoins has grown rapidly, swelling past $12 billion.Â
âIf you were in a stablecoin, you missed out the gains that bitcoin or ethereum or chainlinkÂ were giving,â said Joe DiPasquale, CEO of the cryptocurrency hedge fund BitBull Capital.Â Â
Tweet of the day
BTC: Price: $11,225 (BPI) | 24-Hr High: $11,295 | 24-Hr Low: $10,956
Trend:Â Bitcoinâs bullish bias remains intact despite Sundayâs sudden flash crash.Â
The top cryptocurrency by market value was trading in the green near $11,225 at press time, having dropped by $1,400 to levels under $10,700 yesterday. The price slide erased (or engulfed) the uptick seen in the preceding four trading days.Â
Bearish engulfing candles like that formed Sunday are widely considered early signs of an impending bearish reversal. However, the drop looks to be nothing more than a healthy pullback, which often occur after a notable rally.
Bitcoin rose by $2,900 in the 11 days to Aug. 31, pushing the widely tracked 14-day relative strength index into overbought territory above 70. As such, a pullbackÂ was likely and expected. In the past, bitcoin has seen bigger price drops during bull runs.Â
âThe latest bitcoin pullback was only 15%. There were at least six pullbacks of 30%+ or more last bull market uptrend,â popular analyst Josh Rager tweeted early Monday.Â
And while Sundayâs sell-off was the biggest single-day decline since May 10, it failed to take out the former hurdle turned-support of $10,500 (February high). Prices closed (UTC) well above that level on Sunday, confirming a bullish breakout for the week.Â
Looking ahead, a re-test of $12,000 cannot be ruled out, as the 14-day RSI has rolled over to under-bought (or bullish) territory below 70.00. Upward momentum looks strong with the 10-day simple moving average (SMA) trending north.
The bullish outlook would only be invalidated if the cryptocurrency establishes a strong foothold under $10,500.
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