Bitcoin recovered 26% in July to $23,907, delivering its first positive month of performance since March. Crypto industry volatility subsided, and risk assets more broadly also fared well. The S&P 500 delivered its best month since October 2020, and the Bloomberg Aggregate Bond Index rallied 2.5% despite the Fed hiking its benchmark interest rate.
The cross-asset rally was partially driven by commentary from Fed Chair Powell that was seen as less hawkish than initially anticipated. Chair Powell indicated that, while the Fed could indeed raise rates at the September meeting, its policy stance and the pace of rate hikes should be assessed in the context of overall economic growth and that incoming data would be important. While this left the door open for a potential adjustment in policy and in tone at the next meeting, July’s surprisingly strong payroll report suggests that monetary policy may remain restrictive, which could be a headwind for bitcoin and other risk assets.