Bitcoin Heads for Best Quarter in 2 Years, Outperforms Ether, Gold, Nasdaq

One observer said poor order book depth is primarily responsible for the rally, while others pointed to the cryptocurrency's sound money appeal and Fed pivot speculation as bigger catalysts.

AccessTimeIconMar 29, 2023 at 9:30 a.m. UTC
Updated Mar 29, 2023 at 2:59 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Bitcoin (BTC) has begun 2023 with a bang, marking a positive turnaround from a year-long swoon.

The leading cryptocurrency by market value has added almost 72% to $28,500 this year, its best quarterly gain in two years, CoinDesk data shows. The rally has lifted the cryptocurrency's market value to $542 billion.

Just three months ago, some experts were mulling the possibility of bitcoin falling to as low as $12,000 this quarter, after its valuation had declined by 76% since November 2021.

The rebound has put bitcoin ahead of ether (ETH), the second-largest cryptocurrency by market value, which appears on track for a 50% quarterly gain. Gold has added over 7%, while the tech-heavy Nasdaq Composite index has rallied 15%.

Much of the rebound has been fueled by speculation that central banks, led by the Federal Reserve, will abandon their aggressive rate increases in response to recession signals.

The so-called Fed pivot expectations strengthened early this month after three U.S. banks collapsed and the central bank launched emergency funding programs to arrest panic in the banking sector. The central bank's balance sheet has recently expanded by $300 billion, undoing months of quantitative tightening. According to fed-funds futures, traders now see the Fed beginning an easing cycle in June with a rate cut of a quarter percentage point.

"It's all about expectations of new easing measures by central banks, especially the Fed," Martin Leinweber, digital-assets product strategist at MarketVector Indexes, told CoinDesk TV. "Among all risk assets, bitcoin stands out as being the most sensitive to liquidity swings."

David Foley, managing partner at Bitcoin Opportunity Fund, said assets with sound money appeal, like bitcoin and gold, are benefitting from the liquidity injections.

"With the Fed suddenly turning on a dime, having to throw some QE back into the system to protect the banking system, money flows into sound money assets: gold, silver. And bitcoin being sound money is going to be the fastest in the race," Foley said on CoinDesk TV, referring to quantitative easing.

Some observers say bitcoin's worsening order book depth has played a bigger role in the price surge.

Order book depth refers to how easy or difficult it is to get in and out of large trades at stable prices. The depth has steadily dwindled since the collapse of crypto exchange FTX and reached a 10-month low early this month. In other words, a small buy order now has a bigger bullish impact on prices.

"In this instance, the narrative of bitcoin as a hedge against financial calamity gave BTC the push it needed. But there was little upside resistance to hurdle over," Conor Ryder, an analyst at crypto data provider Kaiko, wrote in a recently published analytics piece.

Edited by Sheldon Reback.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.