While bitcoin is eyeing an August gain for the first time in three years, the cryptocurrency is still lagging U.S. stocks for the month.

  • Bitcoin is trading near $11,610 at press time, representing a 2.27% gain on a month-to-date basis, according to CoinDesk's Bitcoin Price Index.
  • The cryptocurrency last printed gains in August in 2017, when prices rallied by 66%.
  • As of Friday, the S&P 500, Wall Street's benchmark stocks index, was eyeing a 7.25% gain for August, as per data provided by TradingView.
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Bitcoin and S&P 500
Source: TradingView
  • Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since.
  • The rally from July lows below $9,000 has stalled with the weakening of demand from institutions and macro traders, as indicated by the recent 30% decline in open positions in futures listed on the Chicago Mercantile Exchange.
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Bitcoin futures open interest on the CME
Source: Skew
  • On Friday, CME-listed open interest was $653 million, down from the record high of $948 million reached on Aug. 17, according to data source Skew.
  • Bitcoin's rally from $9,000 to $12,400 observed in the four weeks to Aug. 17 was accompanied by a 150% surge in open interest.
  • It's possible investors have been rotating money out of bitcoin and into cryptocurrencies linked to the white-hot decentralized finance (DeFi) space.
  • The Lend token from decentralized lending platform Aave has gained 150% this month.
  • Other DeFi names like oracle provider Chainlink's LINK token and lending project Compound's COMP token have added 108% and 55%, respectively.
  • Ethereum's ether cryptocurrency is also outshining bitcoin on a monthly basis with over 20% gains.
  • Looking ahead, however, negative-yielding government bonds are expected to continue powering gains in both bitcoin and stocks.
  • And bitcoin, a perceived store of value, may draw stronger buying interest than stocks, with expectations for U.S. inflation beginning to accelerate in response to the Federal Reserve's recent decision to signal tolerance for higher prices.
  • Bitcoin is still down 40% from its record high of $20,000 and looks relatively undervalued compared to U.S. stocks, which are trading at record highs even amid the ongoing coronavirus epidemic.
  • A potential correction in stocks still poses downside risks to bitcoin, according to Joel Kruger, a currency strategist at LMAX Digital.
  • "Bitcoin is still an emerging asset and therefore still somewhat exposed in periods of risk off," Kruger told CoinDesk in a Telegram chat.

Also read: Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge

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