Bitcoin is up 50% so far in 2023, outperforming major commodity and stock indexes. Bank failures have prompted investors to look for alternatives to the traditional banking system, while market expectations of a slower pace of interest rate hikes are positive for bitcoin, industry insiders say.
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bitcoin Despite the collapse of a largely cryptocurrency-focused bank, it is still up 50% this year, outperforming major stock indexes and commodities.
On January 1, Bitcoin was trading at just over $16,500.On Wednesday, it hovered around the $25,000 mark rally starting sunday.
This year’s price surge follows Bitcoin’s 65% plunge in 2022 following a string of major project closures and hedge fundsbankruptcy, liquidity problem and FTX failureone of the largest cryptocurrency exchanges in the world.
The recent rise was a bit of a surprise, In view of the closure of Silvergate Capital and Signature Bank, two of the largest lenders in the crypto industry. And Silicon Valley Bank, considered a mainstay of the tech start-up industry, also failed.
“Bitcoin’s 50% surge in 2023 reflects how much it’s been hit after the FTX crash, changing interest rate outlook, and SVB’s failure (and resurgence),” Antoni Trenchev, co-founder of cryptocurrency trading platform Nexo, told CNBC.
Bitcoin is still down more than 60% from its November 2021 peak of nearly $69,000.
Here are some of the main reasons why Bitcoin is on the rise.
bank failure
Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, said that while the collapse of Silvergate, Signature Bank and SVB sent shockwaves through financial markets, bitcoin’s rally could also be fueled by these failures.
“The events surrounding SVB and other bank failures over the past week have also highlighted the power of a decentralized currency that people can fully custody and own,” Ayyar said. “Now, the concept of decentralized finance is beginning to take root in the hearts of the people.”
Bitcoin is called a decentralized currency because it is not issued by a single entity such as a central bank. Instead, it relies on an underlying technology called a blockchain, whose network is maintained by the community.
U.S. regulators had to step in Guaranteed customer deposits However, in these banks.
Nexo’s Trenchev said the intervention “reminds investors of the structural flaws in the U.S. banking system and the U.S. dollar that backs it, which is why we’ve seen a Bitcoin exit this week.”
Proponents of bitcoin claim the digital currency is a way for investors to protect themselves from central bank moves, particularly quantitative easing and loose monetary policy, which they say can erode the value of fiat currencies. Proponents point to bitcoin’s finite supply as a key feature of it as a store of value.
interest rate outlook
A year after the Fed raised rates, the banks failed. The problem for SVB is that it has had to sell assets, primarily U.S. Treasuries, to shore up its balance sheet as depositors withdraw their funds. But it sold those assets at huge losses as rising interest rates pushed down the price of U.S. Treasuries.
Financials under pressure, some analysts say May slow down pace of rate hikes From the Fed, which could help risky assets such as stocks and Bitcoin.Even after Fed Chairman Jerome Powell said that interest rates were high just days before the bank collapsed Probably higher than policymakers expected.
“In the space of a few days, we’ve gone from a hawkish Powell to an environment where economists are predicting the Fed may not even raise rates in March, which favors Bitcoin,” Trenchev said.
“The Fed was said to stop raising rates only if they broke something, and now that something is broken, the attention turns to Bitcoin.”
Bitcoin and Stocks
Bitcoin is up 50% this year.In contrast, high-tech Nasdaq, which has been closely correlated with bitcoin in the past, is up 12% so far this year.this S&P 500 Index rose 2.5%.
the goldSeen as an asset that investors flock to during times of market turmoil, it is up just over 3 percent this year.
There aren’t many commodities or stock indices that beat Bitcoin. In terms of individual stocks, Yuan It is up about 60% so far this year.
Among the major digital currencies, ether up 42% this year, while nightshade The increase is more than 100%.