Despite the pause from major cryptocurrency-oriented banks, Bitcoin has appreciated 50% this year, outperforming both popular stock indices and commodities.
In early January, Bitcoin opened for trading at a price just above $16,500. On Wednesday, the price reached close to $25,000 after experiencing a rise starting on Sunday.
This year’s price rally comes after Bitcoin plunged 65% in 2022 following projects and hedge funds, bankruptcies, loss issues, and the failure of one of the world’s largest cryptocurrency exchanges, FTX.
Bitcoin’s 50% rally in 2023 was due to how it pulled back after the FTX crash, the change in interest rate outlook, and the big drop in SVB.
Since its peak of almost $69,000 in November 2021, Bitcoin has fallen again by more than 60%.
The nosedives of Silvergate, Signature Bank and SVB led to discouragement in the financial markets, but the recovery of Bitcoin could be attributed to these negative consequences.
Bitcoin is a decentralized currency that is not issued by a single entity, such as a central bank. Instead, it is based on blockchain technology and its network is owned by the community.
Nexo’s Trenchev stated that the action taken by the authorities reminded investors of both the structural weaknesses of the banking systems in the US and the continued concern about the US dollar. These were two of the main catalysts behind the growth and momentum of Bitcoin seen this week.
How digital currency protects investors
Bitcoin advocates say the digital currency is an option for investors to protect themselves from central bank moves. Supporters argue that Bitcoin’s value can remain secure due to its finite quantity.
The problem for SVB was that it had to sell assets, mostly Treasuries, to maintain its balance sheet while depositors withdrew funds. But he sold those assets at a very negative price, as interest rate hikes sent Treasuries tumbling.
Some analysts believe that the stress in the financial sector could slow the pace of the Fed’s rate hikes, which could help risk assets such as stocks and bitcoin. It came even after the Fed chair said days before the bank’s collapse that rates would be higher than politicians expected.
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 indices have beaten Bitcoin. Goal in terms of individual actions During the year, it was promoted at around 60%.
Among the major cryptocurrencies, Ether is up 42% this year, while Solana is up more than 100%.
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