Bitcoin is already up 50% this year — beating stocks and gold
KEY POINTS
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Bitcoin is up 50% this year despite major crypto-focused
banks collapsing, beating major stock and commodity indices.
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In Jan. On January 1, bitcoin began trading at over
$16,500. On Wednesday, it was hovering around the $25,000 mark, thanks to the
rally that started on Sunday.
·
The recent increase is surprising, given the withdrawal of
Silvergate Capital and Signature Bank, two of the lenders in the crypto
industry.
·
Industry analysts say that the prospect of a slower pace of
interest rate hikes by the US Federal Reserve is helping bitcoin.
Bitcoin is up 50%
this year despite major crypto-focused banks collapsing, beating major stock
and commodity indices.
In Jan. On January
1, bitcoin began trading at over $16,500. On Wednesday, it was hovering around
the $25,000 mark, thanks to the rally that started on Sunday.
This year's price
increase comes after bitcoin lost 65% in 2022 after several major projects and
hedge funds collapsed, bankruptcy, water crisis and the failure of FTX, one of
the largest cryptocurrency exchanges in the world.
The recent
increase is surprising, given the withdrawal of Silvergate Capital and
Signature Bank, two of the lenders in the crypto industry. And Silicon Valley
Bank, considered the backbone of the tech startup industry, also failed.
"Bitcoin's
50% rise in 2023 shows how it was hit after the fall of FTX, interest rate
changes, and the fall (and resurrection) of SVB," Antoni Trenchev,
co-founder of Nexo crypto trading platform. CNBC. Since peaking near $69,000 in
November 2021, bitcoin is still down more than 60%.
Here are some of
the main reasons why bitcoin is on the rise.
Bank collapses
Although the
failure of Silvergate, Signature Bank and SVB sent shockwaves through the
financial market, the recovery of bitcoin may also cause the same failure, according
to Vijay Ayyar, vice president of the company and national development the
world said that Luna.
"The events
of the past week around the failure of SVB and other banks have also shown the
power of money that people can access and do well," Ayyar said.
"Non-cash is starting to take off as an idea for a lot of other people
now."
Bitcoin is called
a fiat currency because it is not issued by an entity such as a central bank.
Instead, it relies on an underlying technology called blockchain, and the
community manages its network. However, US regulators must step in to guarantee
customer deposits at these banks.
Nexo's Trenchev
said the intervention "reminded investors of the weakness in the US
banking system and the US dollar backing it, which is why we saw a flight in
Bitcoin this week."
Bitcoin supporters
argue that the digital currency is a way for investors to remain silent against
central bank moves, particularly quantitative easing and looser monetary
policy, which they say undermines the value of fiat currencies. money.
Proponents point to the small amount of bitcoin as a key part of the store's
value.
Interest rate outlook
The bank's
collapse came after a year of US Federal Reserve interest rate hikes. SVB's
problem is that it has to sell assets, mainly debt, to shore up its balance
sheet as depositors withdraw money. But he sold those assets at huge losses as
rising interest rates drove down the value of Treasuries. Some analysts suggest
that pressure on the financial sector could increase the pace of Fed hikes,
which could help riskier assets, such as stocks and bitcoin. It came even as
Fed Chairman Jerome Powell said days before the bank's collapse that rates
could be higher than policymakers expected. "In the space of a few days,
we went from a bellicose Powell to an environment where economists are
predicting that the Fed may not raise rates in March, supporting Bitcoin,"
Trenchev said.
"The Fed is
said to stop raising rates when it breaks, and now that things are breaking,
attention has turned to Bitcoin."
Bitcoin vs. stocks
Bitcoin is up 50%
this year. In contrast, the tech-heavy Nasdaq, which has been linked to bitcoin
in the past, is up 12% year-over-year. The S&P 500 rose 2.5%. Gold,
seen as a valuable asset to investors in times of market turmoil, is up more
than 3% this year.
There aren't many
stocks or stocks that beat bitcoin. In terms of individual stocks, the Meta is
up around 60% since the beginning of the year.
Among the major
digital currencies, ether is up 42% this year, while Solana is up more than 100%.
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