Despite the volatile price action of Bitcoin (BTC), the world’s largest cryptocurrency has outperformed every other asset, including gold. Although it is trading below its psychological milestone of $30,000 at $29,000, Bitcoin is expected to grow further in 2023, as it acts as a safe haven for investors amidst the US banking crisis.
Bitcoin Reigns Supreme As the Best-Performing Asset
Capriole Investment, which provides research and analysis on cryptocurrencies, has reported that the current market cycle favors hard assets like gold, as indicated by the 200-week Gold-to-Stocks ratio. This classic indicator highlights when the market favors safe-haven assets like gold over riskier equity assets. Both gold and Bitcoin have generated some of their best returns during these phases.
As the market continues to favor hard assets, Bitcoin has emerged as the preferred safe haven for wealth amidst the US banking crisis and fiat currency weakness. During this period of high correlation, Bitcoin has outperformed gold by 10X in 2023, making it the best-performing asset of the year among major asset classes.BTC’s performance compared with other major assets. Source: Capriole
The strong positive correlation between Bitcoin and Gold has also increased significantly, making them attractive options for investors looking to diversify their portfolios and hedge against economic uncertainty. With unsustainable tightening, banking crises, and de-dollarization looming, the market is turning to these safe-haven assets to protect their wealth.BTC correlation with Gold. Source: Kaiko
According to the report by Capriole Investment, the current Bitcoin rally in 2023 is believed to be organic and spot driven. The report highlights a key metric showing total futures Open Interest as a ratio of the total Bitcoin and USDT market cap.
This metric provides insight into the market’s leverage and shows that the crypto market leverage peaked with the FTX fraud in November 2022. Since then, this ratio has been on a one-way downtrend, despite Bitcoin’s price rallying over 80% from $16,000 to $30,000. This indicates that there has been little speculation in the market this year.
The report suggests that until this ratio spikes or Bitcoin dominance peaks, the foundations for sustainable price appreciation remain in place. This means that the current rally is driven by organic demand rather than speculation, which is a positive sign for the long-term growth of the cryptocurrency market.
Furthermore, the report suggests that the decrease in leverage indicates a healthy market less vulnerable to sudden price drops. This is because a high level of leverage can often lead to market instability, causing sharp price swings and potentially resulting in a market crash.
BTC’s $30-32K Dilemma
According to the report, Bitcoin is trading within the largest technical resistance block on the chart since $20,000. This region, which ranges from $30,000 to $32,000, represents the bottom of the 2021 range and the breakdown point into the bear market that began in 2022.
Additionally, it is a major weekly order block level and Fibonacci extension level from the prior cycle. $30,000 is also a major round number level, representing a 50% increase from the 2017 cycle all-time-high of $20,000, and $32,000 marks a 100% appreciation in Bitcoin since the FTX Fraud bottom at $16,000.BTC’s key levels. Source: Capriole
While Bitcoin has shown remarkable resilience in recent months, it is important to note that past performance is not an indicator of future results. However, according to Capriole’s report, if Bitcoin manages to close above $32,000 weekly, it wouldn’t be surprising to see a new trend carry its price into the $40,000 mark.BTC is trading sideways on the 1-day chart. Source: BTCUSDT on TradingView.com
Featured image from Unsplash, chart from TradingView.com