Bitcoin outperforms other asset classes in Q1 2023; is this a time to invest? (2024)

Bitcoin’s momentum in 2023, in a bid to exit the market winter of 2022, has finally yielded some results. The flagship digital asset has emerged as the top-performing asset class in the first quarter of 2023, outperforming other investment products with over 70% increase, making Q1 2023 Bitcoin’s best quarter since Q1 2021.

This is a remarkable turnaround of fortunes considering the entire crypto sector showing in the last quarter of 2022. It is also extraordinary considering the fact that the milestone happened in the midst of a gloomy economic outlook.

How Bitcoin performed in Q1 2023

According to Bloomberg data, Bitcoin emerged as the top-performing asset class in Q1 2023, with gains of around 73%, making it the digital currency’s best quarter since Q1 2021, where it notably gained 103%, which signalled the onset of the last bull run.

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The coin performed better than other asset classes, such as stocks. The S&P 500 has a 5.5% performance, Nasdaq 100 with a 19% price gain in Q1, and iShares Core U.S. Aggregate Bond ETF recorded a 2.2% jump.

Also, Bitcoin surpassed gold, with the precious metal recording gains of 9.5% in the first three months of 2023, while silver’s returns stood at 0.3%, according to data from Finbold.

The total market value of all cryptos rose 49% in the first quarter to $1.19 trillion, according to Coinmarketcap. Bitcoin rose 73% to $28,440 between the end of 2022 and last Friday, the last day of Q1, while Ether, the second-largest token, rose 53% to $1,827.

Additionally, it has been reported that almost 1,000 new coins have entered the crypto space in 2023 alone, which shows that there is renewed interest and optimism.

What is the cause of this performance?

The last quarter of 2022 proved challenging for Bitcoin. Factors such as the poor macroeconomic environment, Terra (LUNA) crisis, and FTX collapse impacted Bitcoin’s performance, but thankfully, it has remained resilient in 2023 despite the collapse of two major crypto-friendly banks, Silvergate and Signature Bank.

A number of factors helped drive the performance, but this is major. The cryptocurrency sector capitalised on the chaos in the banking sector as investors viewed the asset as an alternative to centralised monetary systems. This was demonstrated in an analysis by Finbold on March 21, which says that five leading United States banks lost a cumulative market capitalisation of $108.92 billion in 2023 alone, while Bitcoin added about $219.86 billion.

Also, a very positive development for Bitcoin this year has been the sharp increase in the Total Amount of Holders metric. Since the start of Q1 2023, the Total Amount of Holders metric for BTC has increased by over 2.15 million, to 45.74 million, making an increase of 5%.

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Furthermore, the number of holders with at least 1 BTC has steadily increased, currently at 992,243. This could suggest that despite price volatility, the coin has been finding traction and being adopted by supporters, including entities and governments.

What should be expected next?

Bitcoin’s reaction to the crackdown on Binance and Coinbase by the CFTC and SEC has shown that the future of the asset is not dependent on just one exchange, which is encouraging to the industry as a whole.

April has traditionally been a bullish month for risk assets, and this year is expected to be no exception, with both Bitcoin and US stocks expected to thrive. As we head into the year’s second quarter, another metric to keep a close eye on is the price correlation between Bitcoin and Gold. The 30-day correlation between the two assets reached over 0.3 this month, its highest over 12 months.

Basically, the ongoing bullish technical set-up for Gold certainly bodes well for further price gains if Bitcoin retains this price correlation with Gold.

Furthermore, recent data from the Federal Reserve indicates that inflation is cooling down, which has raised hopes that policymakers will be able to dial back their aggressive monetary tightening. This could further support the upward momentum of Bitcoin, giving investors more reason to be bullish.

In conclusion, April is shaping up to be a favourable month for Bitcoin, and if we continue to see a rising trend in the total number of Bitcoin holders in Q2 2023, it could easily translate into more gains ahead.

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