Ryze Recap 7/29: Why Bitcoin is Making Yearly Highs

It’s Wednesday, July 29th. If you’re new here— Ryze Recaps is a newsletter synthesizing the biggest news Bitcoiners need to know, in 2 mins or less.

We’ve got one main story for you today.

Why Bitcoin is Making Yearly Highs

Earlier this week, Bitcoin’s price reached $11,425 and made a new high for 2020. This comes in tandem with a potential second round of fiscal stimulus, with Congress considering a $1 Trillion relief package for individuals and businesses (mainly the latter). This would bring the total amount of fiscal and monetary stimulus to $3.2 Trillion in the US. Investors and speculators see this as a debasement of the Dollar, which is weakening in all aspects.

What’s happening:

  • The Dollar’s value relative to foreign currencies such as the Euro as at a two-year low. The US Dollar Index has fallen nearly 7% in the last 3 months. Goldman Sachs issued a report warning investors of a potential collapse of the US Dollar as the global reserve currency. Goldman writes that we are in “an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to an all-time low.” Goldman went on to state that “[there are] real concerns around the longevity of the U.S. dollar as a reserve currency.” In such an environment, investors seek alternative assets as a hedge against inflation, which could explain why Bitcoin, gold, and silver have soared this week.

  • Institutions are jumping at the opportunity, as evidenced by record volumes on institutional products such as Bitcoin futures. Open interest (the total value of outstanding trades) is at nearly $5 Billion across all Bitcoin futures markets, which is an indicator of increased investment activity. Daily futures volume is nearly $50 Billion, the second-highest of the year. The CME’s Bitcoin futures nearly had the most volume they’ve seen in a single day, and Bakkt’s futures far surpassed previous record volume. Grayscale is also seeing record inflows, adding nearly $1 Billion in AUM in the last week, with over 80% of it being Bitcoin.

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Why it matters:

  • The current macroeconomic environment is a perfect storm for Bitcoin. The actions that governments and central banks are undertaking right now will have inflationary consequences, which will take a long time to play out. We likely won’t see any real effects in the near future, but Bitcoin’s price is already reacting to these events. If we’re seeing a 20% move in a couple of days because a stimulus bill is being announced, imagine what could happen when we actually see the long-term effects.

  • The last Bitcoin bull run was led primarily by retail participants— everyday consumers, who were afraid to miss out on a way to make a lot of money in very little time. It was a hype-driven rally. This time seems different, and we’re only at the beginning. Given the increase in institutional interest this year, institutions will play a much bigger role in a rally this time around, and with them comes a lot more money. And what’s more is that this isn’t just driven by hype. This environment, and the actions governments are taking, are exactly what Bitcoin was made to combat.

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In case you missed it…

  • Robinhood’s head of crypto has reportedly left the firm. The retail brokerage has seen a massive uptick in users this year, given the rise of trading as a hobby in the absence of sports. Robinhood had grand plans to expand its crypto functionality, but this departure may have thrown a wrench in the gears.

  • Bitcoin is the Ultimate Insurance: Yesterday, we published an essay making the case for Bitcoin as insurance against the financial system, not just an investment. Like all insurance, a small amount of Bitcoin will have a meteoric payoff. Check it out here.

That’s all for today! We’ll be back again with another Ryze Recap.

Written by Ryze Financial— helping you understand and invest in Bitcoin, on your own terms.