Cryptocurrencies performed significantly better than other asset classes in the first quarter. As sales dried up since the FTX collapse, the digital assets managed to make gains that had not been seen in two years.
According to the latest IntotheBlock newsletter shared with crypto potatoBitcoin and Ethereum, the two largest cryptocurrencies, have posted their biggest quarterly price gains since the first quarter of 2021.
chain review
Bitcoin’s market capitalization rose 20% in March alone, adding to a 70% positive turnaround in Q1 2023. Ethereum followed a similar trend, rising 9% on a monthly basis and 49% on a quarterly basis in the market capitalization. The ITV report noted,
“Bitcoin’s outperformance is likely indicative of its growing attractiveness as a digital store of value, with its correlation to gold prices increasing from -0.3 at the start of the year to 0.9 at the end of the quarter. Ether’s 49% quarterly rise also outperformed many crypto assets (and certainly stocks), though it has lagged Bitcoin since the Silicon Valley debacle and corresponding Fed reaction.”
Tether, the world’s largest stablecoin, also kicked off the year on an impressive note with a 12% monthly and 20% quarterly change in market capitalization. It was due to investors switching from the Circle-backed USDC after the stablecoin was severely tested by uncertainties in the banking sector, as well as increased regulatory scrutiny. USDC’s monthly market capitalization fell to 23%, bringing its quarterly figure down to 26%.
Where is it next?
Several factors helped drive the performance of cryptocurrencies. The asset class’s 2022 concluded with the bankruptcies of several major companies culminating in the implosion of the FTX exchange amid fraud allegations and the collapse of Terra just months earlier.
The change in sentiment began in January. Three months into the year, the market rallied again when three banks failed. Many in the community pointed out that the use of Bitcoin as a “safe haven” from the traditional financial system has finally come to the fore. This is despite the fact that two of the three banks, Silicon Valley Bank and Silvergate, have close ties to the cryptocurrency industry.
The Blockchain data further suggested that current market conditions appear to be unstable. As such, Bitcoin and Ethereum are currently in a place of high buying activity.
$27,000 and $1,700 for Bitcoin and Ether, respectively, are crucial to watch in the short term, according to ITB analysis, as they have the highest concentration of buyers, with 623.8k BTC (roughly $17 billion) and 8.4 M ETH (approximately $15.1 billion) being acquired at this level. Furthermore, the two crypto assets are unlikely to find key support based on past buying patterns if these levels are breached as high as $24,500 and $1,500 for Bitcoin and Ether.
On the bright side, long-term investors have continued their accumulation trend. Two major events that may further catalyze the price trajectories of the two major tokens are Ethereum’s Shanghai upgrade, scheduled for this month, as well as Bitcoin’s halving, which is still a year away.
ITB stated that the confluence of bullish and bearish factors is likely to make the second quarter interesting.
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