On Monday Bitcoin topped over USD $11,400, reaching a high not seen since August 2019. Bitcoin has only reached this level three times since the massive run up in 2017 that pushed the price up to nearly USD $19,000. In this edition of Bitcoin Moves, we look at what has caused the increase in price and whether the momentum will keep going.
Here’s your market snapshot:
Bitcoin price movements
- Current Bitcoin price: USD $10,959, up ~17% from last week (USD $9382)
- 24hr high: USD $11,425
- 24hr low: USD $10,304
- 24hr change: +11%
- 24 BTC volume sits around USD $36 billion, up 100% from last week (USD $18 billion)
- 30 day high / low: USD $11,298 / $8,977
- 90 day high / low: USD $11,298 / $8,374
- Bitcoin Volatility Index (BVI), 30day: 0.508, down 26% from last week (0.682)
- Hashrate: 127.32 EH/s, up 10% from last week (115.91 EH/s)
- SPX-BTC 90d correlation: 0.14, down 33% on last week (0.21)
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The bulls are back?
Bitcoin has gained 17% in the last week, breaking out past the $10,000 psychological level and reaching over $11,000 on Monday. $10,000 has long been a critical point for Bitcoin, representing a growth signal that validates bullishness for BTC.
The spark for bitcoin’s rally seems to have been the Office of the Comptroller of the Currency’s (OCC) July 22nd announcement “clarifying national banks’ and federal savings associations’ authority to provide cryptocurrency custody services for customers.”
The news release stated, “the OCC concludes that providing cryptocurrency custody services, including holding unique cryptographic keys associated with cryptocurrency, is a modern form of traditional bank activities related to custody services.”
Transaction fees have increased to 3.865 from recent lows of 0.557 on June 14th, a sign that competition is heating up for block space and transaction confirmation as transaction volume appears to increase at a relatively steady pace and transaction value has jumped from ~USD $25k to $40k in the last two days.
As the price has increased significantly over the past several days, volatility is up 6%, but down 26% over the week according to the Bitcoin Volatility Index 30-day estimate. And today, IntoTheBlock’s buy signal and on-chain signals are bearish, pointing to a possible retracement.
BTC vs USD
As the economy experiences contraction and the government seeks to stimulate economic growth through an increased money supply, Bitcoin puts on a show of confidence. Globally decentralized, Bitcoin is independent and not systemically impacted by traditional finance. While we see correlation to equity markets, notably through times of liquidity crunches, Bitcoin ultimately provides a hedge against fiat debasement.
After a record-setting stimulus plan was enacted in March, the Federal Reserve will continue printing dollars in an effort to support the slowing economy with needed liquidity. USD is infinite; it can and will continue to be printed as part of quantitative easing (QE), a form of monetary policy that increases the money supply. In contrast, Bitcoin is finite, there is and always will be a limited amount. Monetary policy underscores the inflationary nature of fiat currency (USD), and highlights the deflationary design of Bitcoin.
After two days of policy meetings, the Federal Reserve will hold a news conference tomorrow, July 29th, to discuss the state of the economy and the need for economic stimulus. Interest rates, which are at zero, are expected to remain unchanged. With a recent increase in reported coronavirus cases, there is potential for a heavier economic recession later this year.
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Correlation to precious metals
Alongside the rally in BTC, there has been a simultaneous rally in precious metals and weakness in the US dollar. Gold futures are trading a new all-time high, surpassing levels not seen since 2011 and silver futures are also trading at multi-year highs. According to Bloomberg, some investors say gold could continue rising.
Additionally, some investors have noticed the shift in BTC correlations with the S&P 500 weakening and correlations with gold strengthening over the past week, as shown in the charts below.
The US dollar index (DXY), which measures the value of the US dollar relative to a basket of foreign currencies (EUR, JPY, GBP and others), has fallen ~3.7% over the past month and is down 2% in the past week alone. DXY is currently trading at levels not seen since early 2018 as the stock market began to rally after a significant correction at the beginning of the year.
Tailwind for Bitcoin forks
In the news
Bitcoin ruled to be a form of money
On Friday, a federal court judge ruled that Bitcoin falls into the definition of money, which “commonly means a medium of exchange, method of payment, or store of value.” Read more on Coindesk.
According to The Block, “open interest in CME Group’s cash-settled bitcoin futures has hit an all-time high of $724 million amid bitcoin’s price rise.” This suggests that money is coming into the market and indicates that traders may expect the price to continue rising.