July Bitcoin Fundamentals

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July Bitcoin Fundamentals

Continuing the month-end wrap-up theme from our Markets section we want to cover recent shifts in bitcoin fundamentals.  Even if you have never/will never own a crypto currency, there are good reasons to follow bitcoin:

  • Bitcoin was literally born from the 2008 Financial Crisis. For a certain subset of market participants it remains a levered hedge against macro instability and aggressive central bank policies like negative interest rates.
  • That makes its price movement something of a canary in a coalmine: worth watching when things seem fine, just so you know when it starts to signal trouble.
  • For readers who make their living managing other people’s money, crypto currencies are “a thing”, as the kids say. Some basic knowledge of current fundamentals can go a long way to establishing and maintaining credibility with clients, especially those with fewer gray hairs than we see in the mirror every morning.   

With all that in mind, here is the latest data from bitcoin- and crypto- land:

#1: Bitcoin is down 14% for July but still +157% on the year.  It has outperformed the aggregate of all other crypto currencies over both periods, with current market share of 65% versus 52% at the end of 2018 and 61% at the start of the month.

#2: Bitcoin’s price continues to follow the worldwide volume of Google searches for “bitcoin”:

  • The one-year peak for bitcoin searches was in the last week of June 2019.
  • Bitcoin’s 1-year high was a week later, on July 9th at $12,900.  The lag between searches and price is logical enough: search first, invest second.
  • Since those late June highs Google search volumes are down 49% and, as noted, bitcoin’s price has pulled back.

#3: Global growth in the number of bitcoin wallets slowed in June:

  • Trailing 30-day growth is just 2.0%.
  • That is below June’s growth rate of 3.0%.
  • It is also well below April’s 5.8% growth and May’s 6.0% increase.

#4: Much of the buzz around crypto currencies this month centered on Facebook’s Libra project, but Washington’s chilly response to it clearly deflated investor interest in the space.  So far much of that criticism has been limited to Libra itself, but there has been some spillover to critiques of bitcoin’s still-opaque market and historically questionable use cases. 

Summing up: even with recent price declines, July had something for everybody interested in bitcoin and the crypto space.  Proponents will say that Facebook’s interest is a sign the asset class has reached another milestone.  Critics will use the same event and DC’s reaction as proof positive that “money” will remain the domain of government, and government alone. 

Our perspective, informed by +6 years of covering bitcoin’s frequent boom and bust cycles, is that this remains an area of interest and a potential “lunch money” bet for the adventuresome investor.  No others need apply, even as the space remains a useful source of broader market trends.