On a standalone basis, bitcoin’s 2023 rally is impressive. Making that performance all the more notable is the point that the cryptocurrency stood firm at an opportune time for investors: In March, as stress in the global banking system markedly increased.
That could go a long way to elevating bitcoin in the store of value debate and with its correlations to gold – long a primary safe-haven asset – the largest digital currency may be giving investors a chance to pair a higher-octane asset to pair with usually slower-moving bullion.
Data confirm bitcoin was surprisingly steady last month as Silicon Valley Bank (SVB) and others faltered and as the Federal Reserve expanded its balance sheet by $300 billion.
“During March, Bitcoin settled $650 billion, facilitated ~9 million transactions, issued ~26,000 new BTC at a steady and predictable ~1.8% inflation rate, attracted ~13 million new addresses, and generated ~$700 million for miners securing the network. In short, Bitcoin did not skip a beat as the banking crisis took hold,” according to ARK Investment Management.
Another point in favor of Bitcoin’s March showing is that it dispelled the notion that crypto was the cause of elevated duress in the global banking systems. That’s an argument some regulators are leaning on, but some market observers contest that view, noting more regulations on traditional banking may be needed.
“Regulators were quick to blame crypto for the banking crisis. Instead of blocking financial platforms that are decentralized, transparent, and auditable, with no central points of failure, we believe regulators should focus on the centralized points of failure in the traditional banking system,” added ARK.
Importantly, bitcoin’s 22% March gain showed signs the digital asset – at least for a month – was highly uncorrelated to equities, in particular widely followed financial services and regional bank indexes. That could be a step toward Bitcoin building a stronger foundation as a credible safe-haven asset.
Bitcoin’s transparency relative to a traditional banking system often viewed as opaque along with robust transaction activity suggest some investors are buying into the notion that there’s relative safety in an asset often viewed as volatile.
“The number of transactions in the Bitcoin network has reached over 250k consistently throughout 2023 for the first time since April 2022,” concluded ARK. “Transactions peaked at 277k during March, values not seen since price approximated $50,000 in early 2021.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.