Bitcoin prices did not rally sharply in August, even as trade war concerns intensified.
The digital currency did experience some gains during the month, rising more than 20% between August 1 and August 6, when its price surpassed $12,300, CoinDesk figures show.
The cryptocurrency started moving higher after President Trump tweeted his plans to impose additional tariffs on China, and received a boost when the Chinese yuan reached a more-than 10-year low against the U.S. dollar.
As August continued, bitcoin surrendered these gains, falling to as little as $9,325.39 near the end of the month, additional CoinDesk data reveals.
[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.]
While macroeconomic factors were credited with causing bitcoin’s gains early in August, these variables lost their impact as the month went on, claimed Jeff Dorman, chief investment officer of asset manager Arca.
“August began with a 20% rally in Bitcoin led once again by the same macro factors that have supported it for most of this year — endless rate cuts from global Central Banks, declining currencies including the critically important Chinese Yuan, a series of Trump tweets about tariffs and reckless monetary policy, a nasty decline in equities, and, of course, the potentially significant impact of a no-deal Brexit,” he stated.
“Unfortunately, the perfect macro storm was erased throughout the rest of the month as these negative correlations broke down and Bitcoin and other digital assets ended the month in the red.”
Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, also weighed in, stating that “while global economic factors have served as precursors to Bitcoin price movements recently, they have not had any lasting impacts.”
“It is not uncommon for crypto markets to react to global developments and news, but such moves are usually short-lived and loosely correlated.”
While some pointed to macroeconomic variables to help explain bitcoin’s price movements in August, others provided a simpler account, stating that the cryptocurrency was consolidating during the month.
DiPasquale was of this frame of mind, asserting that the digital currency entered a consolidation phase after enjoying sharp gains earlier this year.
The digital currency climbed more than 300% in 2019, rising from less than $3,400 in February to almost $14,000 in June.
Since reaching its 2019 high of $13,879.24 in June, the cryptocurrency has calmed down somewhat, fluctuating mostly between $9,000 and $12,000.
A perfect example of bitcoin’s relative malaise is its 30-day volatility, which fell to its lowest in more than seven weeks on August 17, when it had a reading of 57, according to figures provided by Blockforce Capital and Digital Asset Data.
This measure of volatility, based on data gathered from multiple exchanges, then bounced back slightly, ending the month at a reading of 60.2, stated David Martin, chief investment officer at U.S. asset manager Blockforce Capital.
“Bitcoin is usually the least volatile cryptocurrency, garnering similarities from traditional markets where large-cap stocks are less volatile than small-cap stocks,” he emphasized.
“Over the past year, bitcoin has been the least volatile or second least volatile digital asset 73% of the time. Recently in June, bitcoin was in the top percentile of digital asset volatility where its 30-day volatility hit 123%, but has retreated and has closed the month of August at an eight-week low of 60%, below its long-term average of 78%.”
This relative calm has extended to other cryptocurrencies, noted Martin.
“The volatility of top digital assets is down across the board in comparison to recent months,” he stated.
“The rangebound nature of the price and lack of market direction has consolidated both price and the standard deviation of asset moves.”
Reviewing sentiment data for the digital currency markets shows that bitcoin’s price movements this year may very well be driven by different factors than the 2017 bull run, which saw the world’s most valuable cryptocurrency rise from less than $1,000 to almost $20,000.
The 2017 bull market, which coincided with several digital currencies experiencing astronomical gains, was largely associated with the surging interest of retail investors.
This time around, it may be different, according to Joshua Frank, cofounder of digital analytics platform TheTIE.io.
“We found something pretty interesting when looking at metric we created called NVTweet Ratio,” he stated.
Frank elaborated, stating that “NVTweet Ratio= Network Value/1 Million/30Day Average Tweet Volume. Bitcoin‘s NVTweet Ratio (area chart) hit an all time high of 6.83 on June 25.”
“In other words, BTC was trading at its highest multiple of tweet volume ever recorded. It has since fallen to 5.43 but remains historically high.”
The graph below shows bitcoin’s NVTweet Ratio, illustrated by the orange area, relative to the digital currency’s price, which is depicted by the dark, orange line.
“As tweet volumes are not rising as fast as market cap, an increasing NVTweet ratio may reflect increasing institutional investment in crypto,” said Frank.
He noted that “2017 was retail driven (over 75K daily tweets), whereas this run is significantly less- we haven’t seen more than 40K daily tweets since 2018.”
The chart below illustrates bitcoin’s 30-day average tweet volume relative to its price.
Going forward, bitcoin may have the most positive outlook of the top cryptocurrencies, according to a separate analysis by The TIE, which compared the short-term sentiment of a digital asset (conversations over the last 50 days) to the more long-term sentiment (conversations during the prior 200 days).
“If we look at the long-term sentiment score of the five largest coins, we can see that Bitcoin’s is the most positive,” said Frank.
Disclosure: I own some bitcoin, bitcoin cash and ether.