Bitcoin ETFs, NYSE Bakkt and Goldman Sachs Were Key Market Drivers Last Month

Cryptocurrency markets followed a distinct pattern in August, declining during the first half and then recovering.

These broader movements coincided with a handful of notable developments. Early in August, Intercontinental Exchange, which owns the New York Stock Exchange, announced plans to create a regulated, global exchange for digital assets called Bakkt.

Shortly after, Bloomberg reported that investment bank Goldman Sachs Group Inc. was considering offering custodial services to cryptocurrency funds.

Further, the U.S. Securities and Exchange Commission rejected several proposals for bitcoin exchange-traded funds (ETFs). While this news made headlines, cryptocurrency markets seemed unfazed.

During August, the broader digital currency market fell by as much as 30%, according to the MVIS CryptoCompare Digital Assets 100 Index (MVDA), a key benchmark based on the value of the top 100 largest digital assets. After bottoming out roughly mid-month, this index recovered, climbing more than 19% before August was over.

Several major cryptocurrencies followed the aforementioned pattern, dropping sharply during the first half of the month and then mounting a recovery.

Bitcoin

Bitcoin, the world’s largest digital currency by market capitalization, fell more than 20% during the first half of the month, dropping from $7,564.49 to $5,891.87 on August 13, CryptoCompare data reveals. The cryptocurrency then proceeded to recover, finishing August at $7,061.69, a nearly 20% climb from the monthly low.

Bitcoin Cash

Bitcoin Cash, a fork of the original bitcoin that came into existence in August 2017, suffered more severe declines, dropping 38% from $763.72 at the start of the month to $472.68 on August 13. After reaching this local low, Bitcoin Cash recovered, climbing 17% to $553.70.

Ether

Ether, the world’s second-largest digital currency by market capitalization, also incurred significant losses during the first half of August, dropping more than 40% from $425.52 to $250.45. After bottoming out, the alternative protocol asset or “altcoin” trended higher, climbing 15% to reach $288.29 by the end of the month.

EOS

EOS, a digital token that powers a next-generation blockchain platform, performed similarly to Ether, losing 41.5% of its value during the first few weeks of the month when it fell from $7.15 to $4.18. By the time August was over, the digital currency had recovered to $6.60, a roughly 58% gain from its monthly low.

Strong Correlations

The prices of these major digital currencies moved together largely in unison, and Eric Ervin, CEO of Blockforce Capital, spoke to this development.

“Correlation has been trending upward as of late, with the average correlation between top cryptocurrencies popping back above 0.5” and nearing its 2018 high, he stated. Ervin identified this as a “significant shift,” especially seeing as how this correlation started the year close to 0.25.

Markets Bounce Back

When explaining the overall trends the cryptocurrency markets experienced in August, some analysts described it as digital assets bouncing back after following a downward trend for several months and posting significant losses.

Sean Walsh, a partner at venture capital firm Redwood City Ventures, spoke to these developments. He stated:

It seems this month’s rebound was largely due to the natural reversal of a negatively-biased news cycle that began last Christmas, along with trader excitement for the last 3-4 months of the year when cryptocurrency prices have previously surged,

Jon Pearlstone, publisher of the newsletter CryptoPatterns, offered a slightly different take on the market’s recovery, providing some technical analysis for bitcoin.

August saw Bitcoin start the month with a brutal 10 day drop from $7750 down that led to a successful retest of 2018 lows in the $6000 range… After a mid-month consolidation above $6000, buyers stepped in and BTC broke above bear channel resistance at the $6450 level creating a new bullish trend that ended August above $7000.

Going forward, the cryptocurrency markets could be poised for additional gains, noted Marouane Garcon, managing director of a crypto-to-crypto derivatives platform Amulet. He stated:

August was an interesting month. We saw the bottom and now I believe we’re seeing it run in the opposite direction.

Institutional Interest

Several analysts weighed in on the recent institutional developments, as well as how they represent continued progress for the digital currency industry.

Mati Greenspan, senior market analyst for social trading platform eToro, lauded the Bakkt announcement, describing it as a “potential game changer” and stating that it was “definitely the highlight of August.”

Garcon also offered an optimistic slant, stating that:

There were more positive stories of adoption surrounding Bitcoin this month than negative ones. More institutional and Wall Street players are looking to get off the sidelines and into the game.

Ervin commented on these developments, emphasizing the role that price stability plays in adoption.

“Institutional interest has started to grow this summer, especially after recently testing and finding support around the $6,000 level,” he said. “Institutions will get more comfortable if they feel that a floor to the bear market has been established.”

Bitcoin ETF Rejections

Market observers also spoke to the SEC’s decision to shoot down numerous proposals for bitcoin ETFs. While the government agency’s ruling certainly managed to generate visibility, it did little to move the markets.

“The possibility of rejections was already priced in,” said Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital.

Walsh agreed with this viewpoint, stating that “universal rejection was a foregone conclusion and already priced in.”

Upside Potential

Going forward, the SEC could still approve one of these proposals, said DiPasquale.

“Those rejections were conditional and not blanket rejections. This means the door for future approvals remains open.” He further added that “the chances of SEC approving the VanEck proposal are very high.”

Such an approval could cause Bitcoin prices to surge by granting investors far greater access to the digital currency.