Bitcoin had an impressive performance in July, along with major digital tokens hitting targets over the past four weeks.
Bitcoin (BTC) is up over a quarter to hit $24,000, while Ethereum is up about 55 percent to trade around $1,700.
In the first week of July, the price of BTC led to a sharp increase in the price of all cryptocurrencies. Not unexpectedly, this has helped boost bitcoin mining stocks, according to research by Arcane.
Crypto miners are enjoying brisk revenue
Since miners generate revenue in the form of BTC, an increase in the crypto price should benefit their revenue and profits.
To increase leverage in this aspect, miners keep a significant amount of the tokens they mine instead of converting them into cash immediately. This can be problematic when the price of the crypto falls, but when it rises, the impact on their stock prices is amplified.
We can see from the chart how closely these stocks are tied to the price of BTC.
Chart: Arcane Research/TradingView.com
According to new research from the IMF, the link between crypto assets and traditional holdings like stocks has strengthened dramatically in response to increased usage, limiting their perceived benefits of risk diversification and increasing the risk of market instability.
Emerging markets, many of which have pioneered the adoption of crypto assets, also show a stronger correlation between cryptocurrencies and stocks.
The Bitcoin Effect
If you’ve been keeping an eye on the cryptocurrency market, you may have noticed that as the price of Bitcoin falls, alternative cryptocurrencies (often known as altcoins) follow suit. If the price of BTC increases, we expect altcoins to appreciate in value immediately afterwards.
With Bitcoin’s price down nearly in half this year, it’s only inevitable that crypto stocks have had a dismal first half of the year, too. In 2022, shares of bitcoin holding MicroStrategy (MSTR) have fallen 38%, crypto miner Marathon (MARA) 55%, and crypto exchange Coinbase (COIN) 60%, according to Arcane research.
Bitcoin’s solid run is fueling the rise of the crypto market
However, these stocks would have been even lower if they hadn’t staged a dramatic comeback over the past month, fueled by the crypto’s recent impressive performance.
Since the beginning of July, Marathon is up nearly 180%, MicroStrategy is up 102%, and Coinbase is up 100%. There was no significant difference in MicroStrategy or Marathon that would have triggered these price rallies, but the prices of both companies are heavily influenced by the price of BTC.
It’s important to realize that Bitcoin often has the last word when it comes to investor confidence. Before buying or selling an altcoin position, experienced traders and investors carefully monitor bitcoin.
The future direction of crypto markets will be determined by macroeconomic variables, but inflation, rising oil prices and recession fears could keep investors nervous over the next few weeks.
Featured image of Finance Magnates, chart from TradingView.com
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