1st August 2022 – (Bangkok) After a quick spurt upwards on Saturday, bitcoin returned to a lower altitude under $24,000.
The largest cryptocurrency by market capitalization was recently at roughly $23,350, down slightly over the previous 24 hours. Bitcoin finished its second consecutive positive week, rising more than 13% from its Monday low, at one point topping $24,500 amid hopeful signs the economy was slowing enough for the U.S. central bank to soon consider scaling back interest rate hikes. For July, bitcoin rose over 23%, while ether soared more than 55% to change hands a little under $1,700.
On Wednesday, the Federal Reserve increased interest rates by a widely anticipated 75 basis points (0.75 percentage point). A day later, the U.S. Commerce Department reported that gross domestic product (GDP) declined by an unexpectedly high 0.9%.
“The FOMC (Federal Open Market Committee), some tech earnings and the GDP numbers didn’t really dent market confidence last week,” Joe DiPasquale, CEO of the crypto asset manager BitBull Capital, wrote to CoinDesk. “BTC had been showing positive signs in terms of price stability and bidding action below $20,000. All of those things resulted in a rally of sorts, seeing BTC trading just below $25,000.”
Most major altcoins were mixed with NMR and FIL gaining 20% and 10%, respectively, but AXS and SOL each dropping over 2%.
Crypto gains on Friday dovetailed with major equity indexes, which rose with the tech-heavy Nasdaq and S&P 500, jumping 1.8% and 1.4%, respectively. Both indexes rose in July with the latter gaining over 9% for the month, its largest increase since November 2020, as investors remained undaunted by disappointing earnings and warnings of slowing growth to come at a number of the world’s largest brands.
Continued fallout for crypto
Crypto news included the now almost daily aftershocks from the the terraUSD (UST) stablecoin collapse and Three Arrows Capital bankruptcy. A report published by The Block, citing a restructuring proposal deck, said Hong Kong-based crypto lender Babel Finance lost $280 million in proprietary trades with customer funds. Babel Finance suspended withdrawals and redemptions, citing market volatility and hired U.S. investment banking firm Houlihan Lokey to help chalk out a restructuring plan. Babel is one of the several crypto companies, suffering from the “crypto contagion” following the collapse of Terra and the crypto hedge fund Three Arrows Capital.
Yet as Arcane Research noted in its most recent Friday newsletter, while the crypto lending space is in shambles, other industry developments were more favorable, including Spanish banking giant Santander’s announcement that its Brazil unit would begin offering crypto trading, and large, capital raises by several projects, including Series A rounds of $65 million by Web3 digital identity service provider Unstoppable Domains and $150 million by Layer 1 blockchain Aptos Labs. The latter was led by FTX Ventures, the venture capital arm of crypto exchange FTX, and Jump Crypto.
“Significant capital raises are back as the dust has settled in the industry,” Arcane wrote.
Still, BitBull’s DiPasquale remains wary about the macroeconomic environment and its potential to head off a longer-term crypto rally. He will be eyeing FOMC’s September meeting, which is expected to generate another hefty interest rate increase.
“We are likely to see increased volatility in the coming month as speculators take their chances,” he wrote, but added: “We remain confident that bidding BTC under $20,000 is likely to be a decent entry in the long-term. We continue to look for signs of conclusive breakouts and would be comfortable taking entries during steep drops in the coming months.”