August Started with Promise For Bitcoin Price But Failed to Deliver For Crypto Investors

Caught in the middle of rising tensions between two of the world’s biggest countries and reports of economic turmoil, stock markets tumbled. So did Bitcoin and crypto markets.

August promised much, when it started off with a surge for crypto investors. But it delivered little – markets soon shed their gains and resumed a mostly flat trajectory.

Bitcoin, which was trading in the $10,000 range, rose by 9% during the first week of this month. But it ended the month as much as 5% below its opening price for the month.

The loss percentages may vary between sources but all are agreed that crypto markets bled red last month.

Messari crypto’s OnchainFX states that Bitcoin produced negative 8% returns over the last month. Based off calculations on coinmarketcap.com, the original cryptocurrency lost 3.5% of its overall value. Among the top three coins, Ethereum’s Ether was the biggest loser, with a 20% decline from its overall value. Ripple’s XRP token, which was hammered by lawsuits last month questioning its utility, was not far behind, with losses of almost 18%.

A New Hope Becomes a False Start  

Investors cheered Bitcoin’s rally during the first week of August after China retaliated to President Trump’s tariffs by devaluing the yuan. Bitcoin evangelists and entrepreneurs immediately pronounced the cryptocurrency as a safe haven. But that proved to be a false call.

Even as trade tensions increased and further evidence of economic volatility came to light, crypto markets mostly remained stagnant for the rest of the month.

This, in spite of the Bank of England governor’s vote of confidence for a digital currency to replace the U.S. dollar as global reserve in trade transactions and reports stating that China would introduce a digital currency for its economy, possibly by November 11.

There was positive news from the industry as well: Bakkt, an exchange targeted at institutional investors and aiming to bring liquidity to the crypto ecosystem, announced a September 23 launch date.

Bitcoin may become a safe haven in the future but its time has not arrived yet. According to research firm Refinitiv, the S&P 500 lost 1.8%, Nasdaq 2.6%, and the Dow was down by 1.7% overall in August. Based on the narrative being created around cryptocurrencies, those losses should have translated into gains for bitcoin and other coins. That did not happen.

Instead, the role of Bitcoin and cryptocurrencies in aiding crime once again came into a sharp spotlight in August. Government agencies coordinated efforts to nab drug rings and criminals, who used crypto for money laundering and to facilitate the purchase and sale of drugs in the opioid crisis. Cryptocurrencies had nabbed headlines once again, but for the wrong reasons.

The Next Stage for Bitcoin

According to Mike Novogratz, CEO of Galaxy Digital Holdings Ltd, Bitcoin’s next stage (in terms of price action) would be when institutional investors start moving into cryptocurrencies. Greater awareness about the possibilities of cryptocurrencies has helped changed their story, he said.

“This is not like a backwater experiment anymore. This is part of the financial infrastructure. It’s time for the regulators to catch up,” he told Bloomberg, referring to moves by various banks and financial institutions to integrate blockchain into their operations.

Novogratz, who had invested almost a third of his fortune in cryptocurrencies at one point of time, assigned a time frame of “five to six years” for Bitcoin to become a mature investment asset.

“What 2017 did, that crazy bull market, is it got people unrealistic expectations on how fast the blockchain revolution, the crypto revolution is actually going to happen. You gotta give them some more runway before we give them the thumbs up or thumbs down,” he said.

Incidentally, he has been among those who contributed to the unrealistic expectations for Bitcoin and cryptocurrencies. At the peak of Bitcoin mania in November 2017, Novogratz predicted that the cryptocurrency could reach $40,000 (effectively trading at four times its price point that day) by the end of 2018.  

Despite August’s relatively disappointing performance, this year has been better to 2018. On an overall basis, Bitcoin is up by 180% this year as compared to a period of prolonged slump last year.

As with all things crypto, it is difficult to identify a single reason for the market’s performance in August. And so it may be for September. While cryptocurrencies may have moved into mainstream conversation, they still remain an object of speculation in financial markets.