Bitcoin Is Rebounding. Here’s One Reason.
2 min
Having suffered a brutal year so far, Bitcoin prices have been rebounding over the past month with mum and dad investors pouring money into cryptocurrencies.
Bitcoin prices gained almost 20% in July, to almost $34,000 from below $28,000. Even so, the largest cryptocurrency has tumbled by two-thirds from November 2021’s all-time high.
Fueling Bitcoin’s recent rally is the token’s correlation to stocks—especially tech stocks—which have surged amid an easing of investor worries over interest rate hikes from the Federal Reserve. The tech stock-laden Nasdaq surged 12% to notch its best July performance on record and the biggest one-month gain since April 2020.
Yet correlations aside, there have to be investors pouring money into digital assets in order for Bitcoin prices to go up. And it has been retail traders—particularly smaller ones based in the U.S.—that drove strong demand for Bitcoin in July, and continue to push prices higher in August, according to a number of market indicators.
“Retail are buying Bitcoin at the fastest rate in history,” Marcus Sotiriou, an analyst at digital asset broker GlobalBlock, wrote in a late July note.
One sign that U.S. investors are particularly crypto-hungry is the Coinbase Premium Gap, which measures the difference between Bitcoin prices quoted on Coinbase Global (ticker: COIN) and those on Binance, the world’s largest crypto exchange. Since Coinbase is mostly popular in the U.S., the gap—tracked by data firm CryptoQuant—can be read as an indicator of how crypto demand among American investors stacks up relative to those in the rest of the world.
As recently as July 12, there was a $35 per Bitcoin discount on Coinbase compared to Binance, but as the month wore on the discount turned into a premium for the first time in months. By July 31, investors on U.S.-based Coinbase were paying a $20 per Bitcoin premium to scoop up the token, the highest premium since the crypto was changing hands around $57,000.
Other evidence supports the notion that it is primarily smaller traders who have swung in to buy Bitcoin while it has been trading at its lowest point since 2020. The total supply of Bitcoin in the largest 1% of accounts decreased to 17.32 million from 17.34 million across the month of July, according to crypto market intelligence firm Messari. By contrast, the supply of Bitcoin in accounts with more than $14,000 increased from 18.2 million to 18.4 million in July.
“The 90-day change in Bitcoin addresses with less than 1 coin (typically retail) is at record highs. The last time it was close to this high was in 2018 when Bitcoin peaked at around US$20,000,” noted Sotiriou from GlobalBlock. “The fact that a similar rate of accumulation is happening now after a 70% drop demonstrates conviction from retail holders in Bitcoin’s long-term value.”
The same trend is mirrored in the crypto derivatives market, which accounts for two-thirds of exchange-traded digital asset volumes, according to CryptoCompare. In the U.S., Bitcoin futures are particularly popular among institutional investors, because these products are traded on the CME and regulated by the Commodity Futures Trading Commission.
The CME offers two types of Bitcoin futures: A standard contract which is valued at 5 Bitcoin, or more than $165,000 at current prices; and a micro contract valued at 10% of 1 Bitcoin, or about $3,300. The former contract is more popular with institutional investors, while the latter is geared more towards a retail crowd.
The open interest of standard CME Bitcoin futures—which refers to the total number of outstanding contracts—rose from just 13,466 at the beginning of July to 13,480, while the open interest among micro Bitcoin futures jumped from 15,998 to 24,960.
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Continued stagflation and cost of living pressures are causing couples to think twice about starting a family, new data has revealed, with long term impacts expected
2 min
Australia is in the midst of a ‘baby recession’ with preliminary estimates showing the number of births in 2023 fell by more than four percent to the lowest level since 2006, according to KPMG. The consultancy firm says this reflects the impact of cost-of-living pressures on the feasibility of younger Australians starting a family.
KPMG estimates that 289,100 babies were born in 2023. This compares to 300,684 babies in 2022 and 309,996 in 2021, according to the Australian Bureau of Statistics (ABS). KPMG urban economist Terry Rawnsley said weak economic growth often leads to a reduced number of births. In 2023, ABS data shows gross domestic product (GDP) fell to 1.5 percent. Despite the population growing by 2.5 percent in 2023, GDP on a per capita basis went into negative territory, down one percent over the 12 months.
“Birth rates provide insight into long-term population growth as well as the current confidence of Australian families,” said Mr Rawnsley. “We haven’t seen such a sharp drop in births in Australia since the period of economic stagflation in the 1970s, which coincided with the initial widespread adoption of the contraceptive pill.”
Mr Rawnsley said many Australian couples delayed starting a family while the pandemic played out in 2020. The number of births fell from 305,832 in 2019 to 294,369 in 2020. Then in 2021, strong employment and vast amounts of stimulus money, along with high household savings due to lockdowns, gave couples better financial means to have a baby. This led to a rebound in births.
However, the re-opening of the global economy in 2022 led to soaring inflation. By the start of 2023, the Australian consumer price index (CPI) had risen to its highest level since 1990 at 7.8 percent per annum. By that stage, the Reserve Bank had already commenced an aggressive rate-hiking strategy to fight inflation and had raised the cash rate every month between May and December 2022.
Five more rate hikes during 2023 put further pressure on couples with mortgages and put the brakes on family formation. “This combination of the pandemic and rapid economic changes explains the spike and subsequent sharp decline in birth rates we have observed over the past four years,” Mr Rawnsley said.
The impact of high costs of living on couples’ decision to have a baby is highlighted in births data for the capital cities. KPMG estimates there were 60,860 births in Sydney in 2023, down 8.6 percent from 2019. There were 56,270 births in Melbourne, down 7.3 percent. In Perth, there were 25,020 births, down 6 percent, while in Brisbane there were 30,250 births, down 4.3 percent. Canberra was the only capital city where there was no fall in the number of births in 2023 compared to 2019.
“CPI growth in Canberra has been slightly subdued compared to that in other major cities, and the economic outlook has remained strong,” Mr Rawnsley said. “This means families have not been hurting as much as those in other capital cities, and in turn, we’ve seen a stabilisation of births in the ACT.”
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