Monthly Market Recap: August

KEY TAKEAWAYS:

  • August was a record-breaking month — the prices of BTC and ETC reached record highs in months, partly driven by the DeFi fervor
  • Transaction fee on Ethereum hit all-time high of over 40.5% of the revenue 
  • Crypto trading volume saw a 75% increase in August, hitting a 30-month high

BTC Market

August kicked off with a strong start as the bull momentum cascaded from July, notwithstanding $1.3 billion being liquidated after the massive sell-off on August 2. 

Source: Bybit

In the subsequent weeks, BTC continued to trend upwards, reaching a new yearly high on 17 August. Although several attempts to overturn the previous resistance failed, the price of Bitcoin remained between $10,590 – $12,480. The bull momentum began to show signs of fatigue towards the tail end of the month, before finishing up at $11,657, resulting in the weakest monthly positive return since June 2017. 

Source: Bybit Insight

Traditionally, August is a relatively slow month for Bitcoin in terms of returns and performance, as evident by the 10-year median return of -8%. This August, it posted a gain of 3%, which might seem insignificant, is in line with the 10-year average estimated at 2%. Despite the light bounce-back on the last day of the month, the market saw a subtle downward trend that hinted at the risk of descending into a bearish momentum, which is confirmed by the massive sell-off in early September. However, in the long term, macro indicators, especially Powell’s unprecedented address on easing inflation standards, hint at a potential comeback. 

Altcoins

Altcoins continued to be the focal point among traders. In fact, positive sentiment picked up for altcoins as many with small market cap enjoyed substantial gains. Some might have even threatened BTC’s dominance in the crypto space. Following the sudden boom in DeFi activities in Q2, Bitcoin’s dominance has been dwindling.

Source: Coinpaprika.com, Bybit Insight
Source: TradingView

The total value locked in DeFi has grown exponentially, almost reaching $9 billion at the end of August. On June 22, the Compound Governance token was launched, which unofficially marked the beginning of the yield farming craze. The total value locked in DeFi, when it just began, was only $1.6 billion. The Compound token ignited a trend of issuing governance tokens to attract more liquidity into the ecosystem. As governance tokens rise in value, the yield reward expands and in turn, attracts more liquidity into the pool, creating a positive feedback loop that propels the exponential growth in the DeFi space. 

Source: DefiPulse

The DeFi craze has driven up transaction fees on Ethereum, which established new record highs, not once, but twice, in August alone. 

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Source: Etherscan

Similarly, the Bitcoin blockchain has seen a steady increase of daily active accounts, reminiscent of when Bitcoin was at its all-time glory. Around one million daily active users have registered since the beginning of August, signaling increased appeal and the broader adoption of Bitcoin. 

Source: Glassnode, Bybit Insight

The DeFi frenzy has cascaded to both BTC and ETH derivatives markets, fueling market speculations about a prolonged bull run. While the spot volumes saw an increase of 49.6% to $944.9 billion, total trading volumes in the derivatives markets surged by 54% to reach $711.7 billion, constituting over 40% of the total market share. 

Source: CryptoCompare

CME’s crypto derivatives volumes increased 55.7%, with record-breaking open interests on futures contracts that soared beyond its former highs. Its future contract volumes have increased 36.3% in August, indicating continued institutional interests in the crypto markets. 

Source: CryptoCompare

Institutional Investors

Grayscale added two more products, Litecoin Trust (LTCN) and Bitcoin Cash Trust (BCHG) into its growing family of crypto trusts, which are designed as a gateway for investors who lack the technical expertise to gain exposure to crypto. The trusts have traded at insane premiums, which soared as high as 1200%, as publicly traded share prices peaked at $78 while the holdings per share were valued at $5.85. 

Source: Seeking Alpha

Nasdaq-listed MicroStrategy also acquired $250 million worth of BTC as its primary treasury reserve asset. This translated into a 0.1% dilution of BTC supply, the equivalent of 23.8 days of new supply of BTC. 

Overall, rapid macro changes in the global economy and the DeFi landscape have infused the crypto space with renewed volatility, which, in turn, is expected to drive up volume and market speculation.