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Bitcoin’s Stealth Rally Puts It Atop the Quarterly Scoreboard Once Again

Bitcoin’s surprising fast exit from its “crypto winter” has once again put the notoriously volatile digital currency atop the leader-board in the first quarter for being the best-performing asset class by a wide margin.

A sign for a Bitcoin automated teller machine (ATM) at a gas station in Washington, DC, US, on Thursday, Jan. 19, 2023. Bitcoin steadied after snapping a rare 14-day winning streak as a mood of caution supplanted the risk appetite that drove up a variety of assets at the start of the year. Photographer: Al Drago/Bloomberg
A sign for a Bitcoin automated teller machine (ATM) at a gas station in Washington, DC, US, on Thursday, Jan. 19, 2023. Bitcoin steadied after snapping a rare 14-day winning streak as a mood of caution supplanted the risk appetite that drove up a variety of assets at the start of the year. Photographer: Al Drago/Bloomberg

Bitcoin’s surprising fast exit from its “crypto winter” has once again put the notoriously volatile digital currency atop the leader-board in the first quarter for being the best-performing asset class by a wide margin. 

With a 72% gain, Bitcoin closed out its best quarter since the three months ended March 2021, when it surged some 103%, Bloomberg data show. That vastly outstripped the S&P 500’s 7% year-to-date advance, the Nasdaq 100’s 20.5% uptick and the iShares 20+ Year Treasury Bond ETF’s 6.8% jump. 

Long-time participants note that volatility is expected — and is even part of the attraction to investors in the relatively embryonic asset class. Bitcoin burst onto the mainstream consciousness with a more-than 1,000% annual gain in 2017, only to post a 74% drop the following year in what became known as a crypto winter. Then after three consecutive annual increases, it tumbled 64% last year amid a series of industry scandals and bankruptcies. 

“For many crypto market observers, it’s not at all a surprise,” said Noelle Acheson, author of the “Crypto Is Macro Now” newsletter, of this year’s rally. “All the signs were pointing to a strong price floor starting last November, and it was just a matter of time before either the liquidity narrative changed (which it did in early January) or longer-term investors saw a store-of-value opportunity (which seems to have also happened).”

Market-watchers are at odds over the exact causes behind Bitcoin’s big bounce. The coin started 2023 coming off its second-worst year ever. Partly, some say, it might have been recovering from such a bruising performance. Yet many more have in recent weeks pointed to its origins as reasons why it’s back in demand: amid tremors in the global banking sector, the token can act as a sanctuary given that it’s independent of central banks, they argue. 

“Most people’s knee-jerk would’ve said Bitcoin should do terribly because markets are under pressure or strain,” said Peter van Dooijeweert at Man Solutions. “But actually if you think about the Bitcoin bugs — the people who love Bitcoin — they love the idea of a non-fiat currency — like this is the outside-the-US-dollar, outside-of-the-banking-system-type thing.”

Matthew Sigel, head of digital assets research at VanEck, agrees. “Bitcoin has remained resilient because of legitimate fundamental improvements and its unique role as a bearer asset in a period of skepticism about bank deposits and more central bank bailouts,” he said in an interview.

Bloomberg world equity index rankingsSource: Bloomberg
Bloomberg world equity index rankingsSource: Bloomberg

No matter the catalysts, the coin’s recently been notching rally after rally. Over the last three weeks, which roughly covers the period of when banks in the US started to exhibit stresses, it’s only seen seven sessions out of 22 with losses and has posted a 40% jump in that period. 

It’s not just Bitcoin — which is hovering just around $28,000 — that’s risen during the first quarter. Ether gained 52% to trade around $1,800. 

To be sure, there are some companies as well as some exchange-traded funds that look to amplify returns that have performed better than Bitcoin has this quarter. 

Shares of Nvidia Corp., with a 90% gain, have risen more than Bitcoin has since the start of the year, as have some crypto-specific ETFs, like the Valkyrie Bitcoin Miners ETF (ticker WGMI), which has jumped more than 100%. Levered products are usually also standouts, with 1.5x Nvidia and Meta Platforms Inc. ETFs each surging more than 100% year to date.  

But out of a handful of major asset classes, Bitcoin’s still the standout. Bloomberg data show that in the world of commodities, sugar was the best-performing so far this year, with a 23% gain. In bonds, a global inflation-linked total return index is up 4.5%, while among global stock gauges, the Laos Composite Index is up more than 44% through Friday. 

Stephane Ouellette, chief executive of FRNT Financial Inc., points out that “seemingly, BTC rallies have come from ‘darkest before the dawn’ moments.”

“After the SVB failure and subsequent Signature closing, the narrative entering the week was that it would be a difficult period for crypto,” he said. “In fact, those events fueled the narrative for Bitcoin as an alternative to banking solutions and all of crypto inclusive of BTC had some fantastic positive trading days, which was unexpected for many.”

--With assistance from Lu Wang, Denitsa Tsekova and Sam Potter.

(Updates crypto prices throughout.)

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