Week in Review: Bitcoin’s Comeback Fueled by Growing Inflation Fears with “A Little Help” of Institutional Investors

With food prices surging violently worldwide while the big countries’ authorities keep trying to persuade consumers of much lower inflation, which on top of that is ostensibly purely transitory and totally under control, an army of former skeptics more painfully realize how miserable and pathetic fiat currencies are. Everything – from gasoline despite pausing crude prices – to milk and eggs – surged to new highs humiliating the current U.S. federal minimum wage of $7.25 an hour.

There seems to be the only chance to save fiat currencies from total disgrace is by vigorously slashing trillion dollar government programs along with the lavish military spendings. We know that will never happen, which is why they are doomed. More and more people – regardless of their incomes and social status – started to realize that legal salaries payable in fiat currencies won’t keep up with the pace of ongoing real daily expenditure inflation worldwide. Not overnight, of course, but gradually – as more people will open their eyes and demand monthly indexation of their salaries and wages.

July was the month of sharp comebacks in most cryptocurrencies. Was it anticipated? Absolutely – solely based on the ongoing global inflation data. Did the glorious forecasters know for sure it would happen exactly in July? Hardly. One way or another, Bitcoin survived the short squeeze (see chart below), upsetting the bears, who were vociferously predicting its further fall to $ 25,000. However, the negative sentiment in the cryptocurrency community still persists despite the fact that the total market capitalization of all digital currencies in circulation has grown from $1.4 trillion to $1.6 trillion in a matter of several days. The market reached its maximum in a monthly interval on July 31 at $1.6 trillion, but there is obviously more to come.

Pic.1. Bitcoin Shorters Felt the Pain

Over the month, Bitcoin grew by 20.64% – the most of the top three cryptocurrencies by market capitalization. Meanwhile, Ethereum (ETH) jumped 12.36% over the same period, while Binance’s native token, Binance coin (BNB), grew the least at 8.84%. Bitcoin and cryptocurrencies have seen a violent return to volatility over the last two weeks with the combined crypto market losing then gaining around $300 billion. According to Glassnode, the number of wallets with balances of 1,000 – 10,000 BTC is now recovering, although in general, those were the large stakeholders that bought out the dip, so no-one really had any chance to see early turnaround predictive signs.

Pic.2. While Retail Accounts Continued to Drop, BTC Price Recovered on Institutional Purchases

Before that happened, another plunge of BTC below 30,000 drove the market into a screaming fear. The Greed&Fear index plunged to a value of 10, one of the lowest values ​​in history. But historically any drop of this indicator below 10 always gave an excellent entry point for the newcomers.

Pic.3. Bitcoin Fear and Greed Index Shortly before Turnaround

Now, amid reports institutional investors are gearing up to join the Bitcoin recovery rally, a new law in Germany will allow institutional investors that currently manage an eye-popping 1.8 trillion euros ($2.1 trillion) to invest in Bitcoin and other crypto for the first time.

The news came after JPMorgan gave its financial advisors the green light to give all of its wealth management clients access to cryptocurrency funds, making it the first major U.S. bank to do so (we know The Bank of New York Mellon keeps its AM arm open to invest in the cryptos, but technically speaking it’s a separate entity). The bank, which is making a significant effort to grow its $630 billion wealth management business, told advisors in a memo earlier last week that they can now issue orders to buy and sell five cryptocurrency products, Four from Grayscale Investments and one from Osprey Funds, effective July 19.

Remarkably, all JPMorgan customers, not just affluent clients whose assets are managed by financial advisors under JPMorgan Advisors, but including those automatically redirected clients accessing its commission-free pre-advisory portal, are now eligible to join the club.

Still, Bitcoin mining difficulty dropped to its lowest since January 2020 at 13.67 trillion hashes (T) last Sunday, which presents a highly beneficial combination for both miners and traders. Since mid-May, when the record 25.05 trillion was reached, the decline has been around 45%.

The decrease in complexity (difficulty) is due to the migration of miners from China. By now, about 90% of their local mining companies have stopped working as four Chinese provinces banned mining in June, and the province of Anhui joined them in July.

By now, almost all equipment in China has already been turned off, while at the beginning of July the 7-day average hash rate of the network dropped to 85 EH/s, the last time the network was at this level about a year ago – after the historic halving of 2020. However, a further decrease in the network hashrate and complexity due to the “Chinese factor” should not be expected giving further boost to Bitcoin price.

Equipment that was intended for Chinese customers is now being resold at discounted prices, and for many customers from the U.S.A., Canada, Kazakhstan, Russia and other countries who did not have time to buy equipment earlier due to shortages, this is a good opportunity to realize their long postponed ambitions. Also mining equipment previously installed in China is being actively moved by owners to other regions and restarted after a forced downtime.