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August saw return of the alts but BTC may not escape September’s shadow

2021.09.23 Hunain Naseer

A look at the crypto market's developments and performance in August 2021 — Market Watch Monthly

Key takeaways

  • August saw several alts surging more than 100% as alt season came quickly.
  • BTC and stocks outperformed other assets in the absence of any negative monetary policy changes.
  • DeFi activity saw a sharp rise, with volumes in August surpassing nearly all other months this year.

Bitcoin recap

Ending with a gain of 14.07%, August was BTC's second consecutive month in the green. The market leader fell as low as 37,307 USDT and peaked at around 50,500 USDT before settling at nearly 47,400 USDT by the month's end, as per the OKEx BTC/USDT price.

Following the recovery in July, the market as a whole had a good showing in August, with altcoins rallying — some much more than others. ETH, for instance, gained a relatively modest 37.78% in the month, while coins like LUNA and SOL posted gains of 203.06% and 240.18%, respectively.

Even BTC, between its lowest and highest points of the month, made a 35.66% move.

OKEx’s BTC/USDT daily chart ending Aug. 31, 2021. Source: TradingView

Bitcoin futures also reflected a return to optimism at the start of August as retail traders warmed up to the possibility of BTC rallying much higher after breaching 40,000 USDT levels. However, as we noted in later stages, retail traders did not take a permanently bullish stance on the market leader despite positive price action.

BTC and stocks drove the market higher

July marked BTC's return to dominance after lagging behind traditional assets for three consecutive months. August extended that trend amid a strong performance from stocks with no major tapering measures by the U.S. Federal Reserve in sight.

Notably, gold and oil were poor performers in August, down 0.05% and 6.96%, respectively. Meanwhile, the Nasdaq and S&P 500 were the top performers at 4.0% and 2.90%, respectively. The U.S. dollar barely managed to stay green in August, as no clear monetary policy choices were evident.

Bitcoin’s August performance compared with major assets. Source: TradingView

August’s trading sentiment on OKEx

With the general recovery across the market, OKEx trading data also showed an uptick in month-over-month volumes for all markets — spot, swaps and futures.

OKEx trading volumes breakdown for August 2021. Source: OKEx

As shown in the chart above, spot trading accounted for 24% of all volume in August, up from July's 19%. While futures also saw a volume increase, their percentage of total trading volume dropped by 6% compared to last month. Swaps, on the other hand, grew 1% in terms of their share of the total volume.

Selected alts made major gains

While July marked the return of BTC and ETH, in terms of performance, August saw alts generally overtake the market leaders, with some beating them by exceedingly large margins.

For instance, BTC and ETH rallied 14.07% and 37.78% in August, respectively, but alts such as XRP, DOT, ADA and SOL went up 57.64%, 86.98%, 112.42% and 240.18%, respectively.

Most major altcoins significantly outperformed BTC in August. Source: OKEx

In line with this trend, we saw the Altcoin Season Index surge sharply in August, going from mid-month lows of around 6 to as high as 50 near the end. This quick rise corresponds with the stellar performances put up by select alts in the month.

Alts finally started to rally in August. Source: Blockchain Center

DeFi TVL and volumes show potential sentiment recovery

Decentralized exchanges and decentralized finance protocols remained relatively stable during the recent market downtrend and did not succumb to negative sentiment. Once again, we believe this has to do with their utility as very real alternatives to several traditional financial services.

DeFi value locked figures for the last three months. Source: DeBank

August started with the gross value locked in DeFi at around $91 billion and ended with the figure at over $117 billion. Similarly, the net value locked started with roughly $69 billion and ended with over $87.5 billion.

As per data from Dune Analytics, decentralized exchanges showed mounting volumes in August after July's dip, and Uniswap was in the lead once again. Notably, however, August volumes didn't just exceed those of July but also surpassed volumes seen in every month this year except for May. This could be a sign of a general recovery in the DeFi niche and could result in asset prices increasing in the coming weeks/months.

DEXs saw volumes continue to drop since the May crash. Source: Dune Analytics

In terms of price performance, DeFi assets lagged behind some of the other assets in August, with only FTM putting up notable gains at just over 200%. Some of the typical performers, including SNX, AAVE and COMP, could muster increases of only 13.58%, 18.64% and 9.52%, respectively.

Most of the top DeFi tokens lagged behind other top performers in August. Source: OKEx

Looking ahead

Despite the positive performance in August, September — a month that has historically been poor for BTC and the crypto market — has seen prices crash on more than one occasion.

Currently, the market is reeling from a variety of negative news developments, ranging from expectations of hawkish changes to monetary policy to fallout from a debt crisis faced by China's Evergrande Group.

At the time of writing, BTC has been actively testing the support zone between 40,000 and 42,000 USDT and is not out of danger as of yet. A bounce from here could see consolidation for the market leader until market sentiment turns neutral or bullish.

On the flipside, BTC could get hit by upcoming monetary policy announcements that will also affect stocks and possibly interest rates. 40,000 USDT remains a key support level and a fall below that could see us revisiting prior lows under 35,000 USDT.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.