Despite the pause of key crypto-oriented banks, Bitcoin has appreciated by 50% this year, outperforming both popular stock indices and commodities.
At the beginning of January, Bitcoin opened for trading at a price just above $16,500. On Wednesday, the price reached close to $25,000 after experiencing a surge beginning on Sunday.
This year’s price rally comes after Bitcoin plunged 65% in 2022 following projects and hedge funds, bankruptcy, loss issues and the failure of one of the world’s largest cryptocurrency exchanges, FTX.
Bitcoin’s 50% rally in 2023 resulted from how it pulled back after the FTX collapse, the change in the interest rate outlook, and the big SVB crash.
From its high of nearly $69,000 in November 2021, Bitcoin has fallen again by more than 60%.
The plummet of Silvergate, Signature Bank, and SVB resulted in discouragement in the financial markets, yet Bitcoin’s recovery could be attributed to this negative fallout.
Bitcoin is a decentralised currency not issued by a single entity such as a central bank. Instead, it relies on blockchain technology and its network is owned by the community.
Nexo’s Trenchev stated that the action taken by authorities reminded investors of both the structural frailties in bank systems in the US and continuing concern over the US dollar. These were two of the major catalysts behind the growth and momentum of Bitcoin seen this week.
How digital currency is protecting investors
Bitcoin proponents say digital currency is a go-to for investors to protect themselves from central bank moves. Supporters argue that Bitcoin’s value can remain secure due to its finite amount.
The issue for SVB was that it had to sell assets, mostly Treasurys, to maintain its balance sheet as depositors withdrew funds. But it sold those assets at a big negative, as interest rate hikes caused Treasurys to fall.
Some analysts believe the strain on the financial sector could slow the pace of Fed rate hikes, which could help risk assets like stocks and bitcoin. It came even after the Fed chairman said days before the bank’s collapse that rates would be higher than expected by policymakers.
Bitcoin is up 50% this year. The tech-heavy Nasdaq, with which bitcoin has been closely linked in the past, has soared 12% year to date.
Few stock indexes have beaten Bitcoin. Meta in terms of individual stocks During the year, it was promoted by about 60%.
Among the major cryptos, Ether has advanced 42% this year, while Solana is up more than 100%.
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