Macro crypto currency market outlook

Bitcoin remains confined to a well-defined downtrend despite the latest bounce out from the yearly low. At this stage, the recovery is classified as corrective, with a lower top sought out below the June low ahead of the next downside extension below the yearly low and towards next critical support in the form of the 2019 high in the $14,000 area. Ultimately, we will need to see a clear break back above the June high around $32,000 to suggest the market is finally ready to put in a meaningful bottom and start heading back towards and through the record high from late 2021.

Finally, a positive month for crypto assets after some intense downside price action in the months of April, May, and June. Both bitcoin and ether held up above their respective yearly lows from June, while also closing a good deal higher in July. Ether was the star performer, up 54% in July. Bitcoin also performed well, up 16% in July. Still, year-to-date, bitcoin is down 52%, while ether is down 58%.

The bullish July performance in crypto assets was largely attributed to global macro fundamentals and central bank policy, with the market’s pricing of a less aggressive Federal Reserve rate hike path reassuring investors and fueling a rebound in risk assets. As things stand, crypto assets including bitcoin, are still very much correlated to global sentiment, and the recovery on that front has helped to drive demand for bitcoin and ether. Given that ether is even more sensitive to risk appetite, it’s made sense to see ether solidly outperforming bitcoin over this period.

Another driver of crypto strength in July was the cessation of tension around fallout in the space associated with the blowups at the likes of Terra, Celsius, and Three Arrows Capital. In July, crypto assets were relieved to see those stories mostly in the rear-view mirror, allowing participants to get back to focusing on all the positives around the tremendous potential for decentralized assets.

There was also a lot of optimism around the news of the timeline of Ethereum’s merge upgrade, which will see the protocol move from proof-of-work to proof-of-stake. The long-awaited upgrade, expected to happen in September, promises to deliver a more scalable, secure network. We believe this will help to drive increased adoption of crypto assets, and offer more reassurances to larger, institutional players looking to expand their exposure beyond bitcoin.

Looking ahead, we believe additional downside in bitcoin and ether should be limited. At the same time, there is still plenty of risk out there and we’re not convinced the bottom is in just yet. Our primary concern is the global economic outlook and prospect that higher inflation and slower growth will lead to more of a shakeup in risk assets, which will open more downside pressure in crypto. We’re also concerned regulatory uncertainty will continue to weigh on the market. But we do believe we are getting closer to levels where the longer-term value proposition of crypto will be too difficult to ignore at such discounted prices.