Will The Crypto Heat Wave Continue!?

The August 2020 Crypto Outlook....

Welcome to the August Crypto Outlook with Contentworks, an agency specialising in content marketing for financial services, crypto and blockchain.

Cryptocurrencies had an excellent month. In July, the total market cap of all cryptocurrencies tracked by CoinMarketCap rose to more than $326 billion from about $260 billion. Ethereum was the best-performing major currency, gaining by 44%, followed by Ripple, whose price rose by 35%. Bitcoin cash and Bitcoin rose by 32% and 25%, respectively.

Why Cryptocurrencies Rallied In July

There are several reasons for the current exuberance in the cryptocurrencies industry. First, the US dollar has been in a sharp decline in the past few months. In July, the dollar index, which measures the strength of the currency against a group of peers, declined by 4%. Since cryptocurrencies are usually traded in dollars, a weak dollar tends to be beneficial for them.

Second, cryptocurrencies rose because of the overall mood of alternative assets. For example, in July, key assets like gold, silver, palladium, and copper reached their all-time high. Third, the rising number of coronavirus cases in the United States led many to believe that interest rates will remain lower for longer. Lower interest rates lead to lower real yields. As such, more people moved from treasuries to alternative assets like cryptocurrencies.

Ethereum 2.0 Launch

Ethereum outperformed other cryptocurrencies because of the online enthusiasm about ETH 2.0, which is the first major upgrade to the network. The goal of the upgrade is to make the system faster and more secure to support more smart contracts.

It will do that by moving from the current proof-of-work (PoW) to a proof-of-stake (PoS). The two processes are different because in PoW, miners validate transactions by solving complex calculations. In PoS, validators lock up holdings of the crypto as collateral for the right to validate the transaction.

In July, the developers behind the upgrade released a validator launchpad, which enables people to test the platform. On August 4, the developers will launch the finalised testnet for ETH 2.0. In the past, cryptocurrencies tended to jump ahead of a major event. For example, in May, Bitcoin price rose ahead of the halving event.

US Banks To Provide Crypto Custody Services

In July, the Office of the Comptroller of Currency (OCC) said that banks in the US could offer custody services for crypto assets. The acting comptroller of OCC said:

“This opinion clarifies that banks can continue satisfying their customers' needs for safeguarding their most valuable assets, which today for tens of millions of Americans includes cryptocurrency."

This was a big deal for two main reasons. Firstly, interest for crypto among large institutions is rising as the industry matures. Second, most US banks like Goldman Sachs and Morgan Stanley have mostly stayed out of cryptocurrencies because of compliance issues. Therefore, with regulatory issues behind them, we will likely see these banks announce their crypto offerings in the coming month.

US Coronavirus Cases And US-China Tensions

In July, crypto investors will be watching the number of coronavirus cases in the US and the escalating tensions between the two superpowers. Cryptocurrencies are likely to continue moving in an upward trend if the number of coronavirus cases in the US continue to rise. That is mostly because it will increase the likelihood that interest rates will remain low for longer. It will also mean that the Fed could continue printing dollars, which is a positive thing for digital assets.

The same is true with the deteriorating relations between the US and China. If they continue worsening, it could lead to disruption of trade, which will also lead to more Fed actions.

Top Crypto Events In August

There will be several cryptocurrencies events in August, most of which will be online. Some of these events are Future Proof, International Conference on Decentralised Applications and Infrastructure (IEEE DAPPS), International Conference on Big Data and Blockchain, and Blockchain World Forum.

Bitcoin August Technical Forecast

The weekly chart shows that Bitcoin’s price has been in an upward trend after bottoming at $3867 in March this year. The price is above the 50-day and 100-day exponential moving averages while the RSI has been rising. Therefore, the pair is likely to continue rising as bulls target the next resistance level at $13,917.

Bitcoin price chart

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