July was a welcomed respite from the headwinds risky assets have faced throughout the year. Crypto asset prices are still far off all-time highs, but the month provided some relief—and hope—that macro challenges will fade sooner than expected.
Ethereum was in the spotlight this month, as news on the timing of The Merge and significant progress was announced regarding scaling solutions. Reports from JPMorgan and Citi suggested that the worst of the crypto winter may be behind us, while late in the month crypto assets responded to the ECB and Fed raising rates.
Regardless of short-term price activity, we believe the current environment is creating unprecedented opportunities for crypto investors with a long-term horizon. Next week, we’ll share our research team’s views on the five factors we believe are creating unprecedented opportunities for crypto investors and will be hosting a call on August 10 to discuss this current dynamic. You can register for the call here.
As always, our team is here to answer any questions you might have about these markets.
-Your Partners at Hashdex
NCI PERFORMANCE (USD) YTD -50.5%
JULY NCI PERFORMANCE 35.8%
After a challenging macroeconomic scenario drove sharp price drops in risky assets in the first half of the year, July was a month of relief. While the ghosts of inflation and recession still haunted developed economies, markets reacted positively to confirmation of the Fed’s less-aggressive stance and to solid revenue reports by some of the world’s largest companies. The S&P 500 and Nasdaq 100 recorded gains of 9.2% and 12.6% respectively, while the Nasdaq Crypto Index (NCI) surged 35.8% during the month.1
In this environment, investors reacted to some crypto events and significantly impacted prices. A July 14 tweet from a member of the Ethereum Foundation suggested that The Merge could take place on September 19 (read our latest update on The Merge here). This news triggered a strong appreciation of ether, which closed the month up 66.9%, behind Filecoin (+92.3%) and Uniswap (+87.0%). Bitcoin had the third-lowest rise, increasing 25.1%.
Although July was a very positive month for risk assets, it is still too early to call a reversal of this year’s downward trend as there are still warning signs coming from the macroeconomic front. However, despite the high correlation between crypto assets and traditional risk assets, we believe that macroeconomic events have little impact on the long-term prospects of blockchain technology and crypto assets. Therefore, we remain confident in this new asset class as an unparalleled investment opportunity.
1Nasdaq Crypto Index data, as of 8/1/22
JP Morgan and Citi issued reports suggesting the worst of crypto credit issues may be over. More here.
Ethereum co-founder Vitalik Buterin defended Ethereum’s transition to Proof-of-Stake (PoS).
Polygon, Scroll, and zkSync made announcements about progress on zk-Rollup scaling solutions.
The ECB surprised markets with a larger-than-expected rate hike, while the Fed confirmed a 75 bp hike.