Bitcoin prices climbed in July, reaching their highest in close to one year. When will the world's … [+]
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Bitcoin prices enjoyed some notable gains last month, climbing nearly 27% in roughly two weeks and hitting their highest since August 2019.
The world’s most prominent digital currency climbed to $11,467.95 on July 31, according to CoinDesk price data.
At this point, it was trading at its loftiest value since August 12, 2019, additional CoinDesk figures reveal.
The cryptocurrency experienced a relative malaise for the first two weeks of July, moving within a reasonably tight range between $8,900 and $9,600, before climbing 26.7% between July 16 and July 31.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
After experiencing this run up, the digital asset fell back slightly, finishing the month up 24.4%.
Because of these gains, bitcoin experienced its most impressive July in eight years, according to CoinDesk.
Several Bullish Factors Drive Gains
When explaining the upside that bitcoin experienced in July, analysts pointed to several variables.
Tim Enneking, managing director of Digital Capital Management, previously noted that the correlation between bitcoin and the U.S. equities was “absurdly high for several months,” and it was impossible for the digital currency to surpass the $10,000 level without that price correlation declining significantly.
However, once the price relationship between bitcoin and U.S. equities broke down, it triggered a “rotation from alts into BTC,” he noted.
“Add to that the dollar at record lows and gold at record highs, and BTC has a *lot* of healthy tailwinds right now,” stated Enneking.
Ethereum’s Contribution
Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, also weighed in, emphasizing that while the aforementioned variables helped drive bitcoin’s price movements during July, “we can't ignore the role played by Ethereum in resurrecting market enthusiasm.”
“The DeFi space kicked off this change in sentiment with projects like Compound and Balancer doing well, both in terms of adoption and the market,” he noted.
“Following increasing demand, ETH started looking alive and posted double digit gains, outperforming Bitcoin and other alts roughly two weeks ago,” said DiPasquale.
“These developments also resulted in positive sentiment returning to the market and helping Bitcoin rally past $10k,” he stated.
Central Bank Influence
While Jack Tao, CEO of cryptocurrency derivatives trading platform Phemex, concurred with Enneking’s assessment, he also stressed the impact that central bank policy is having on the digital currency markets.
“There’s always a pool of investment money that moves around, navigating through different assets and markets seeking the best opportunities to make profits.”
“Any time one area doesn’t do well or is projected to decline, the money simply shifts into a more promising sector,” he noted.
“With the high levels of quantitative easing in the U.S., concerns about inflation compel investors to find alternatives such as gold or opportunities within the crypto field,” said Tao.
He added that “a new technology, project, or announcement creates excitement and drives investors into crypto, exactly like Ethereum is doing now.”
“However, ultimately much of this money almost always eventually ends up finding its way back into BTC.”
Bitcoin A ‘Macro Asset,’ Says Analyst
Jeff Dorman, chief investment officer of asset manager Arca, offered a different perspective when explaining the digital currency’s gains in July.
“I don't think correlation or resistance had anything to do with Bitcoin's move higher,” he stated.
“Bitcoin is now much less of a digital asset, and more of a macro asset, now that institutions are pouring in (as evidenced by large volume growth at CME, Bakkt and Fidelity),” said Dorman.
“And as a macro asset, the breakout was inevitable, as the inflation protection/store of value thesis was working everywhere else — gold hit all-time highs, silver hit 8-year highs, the 2s/30s Treasury curve began to steepen, and tech stocks continue to soar.”
“Bitcoin was simply playing catch-up.”
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.
