Bitcoin’s stealth rally puts it back on top of the quarterly leaderboard

Bitcoin’s surprisingly quick exit from the “crypto winter” has once again put the notoriously volatile digital currency on top of the first-quarter chart to be the best-performing asset class by a wide margin.

Up about 70%, Bitcoin is ending its best quarter since the three months ending in March 2021, when it surged 103%, Bloomberg data show. That beats the S&P 500’s 5.5% year-to-date gain, the Nasdaq 100’s 19% gain and the iShares 20+ Year Treasury Bond ETF’s 5.3% jump.

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

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

Market watchers disagree about the exact reasons behind Bitcoin’s big bounce. The coin started in 2023 with the second worst year ever. In part, some say, it may have been to recover from such a bruising performance. Still, many more in recent weeks have pointed to its origins as reasons why it is back in demand: amid turmoil in the global banking sector, the token can act as a safe haven given its independence from central banks, they argue.

“Most people would have said that Bitcoin should do terribly because the 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 outside-the-US-dollar, outside-the-banking-system kind of thing.”

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

Regardless of the catalysts, the coin has recently fallen rally after rally. Over the past three weeks, roughly covering the period when US banks began to show stress, it has seen only eight out of 22 losing sessions and has registered a 40% jump in that period.

It’s not just Bitcoin — currently hovering around $28,000 — that has rallied during the first quarter. Ether has added about 50% to trade around $1,800.

To be sure, there are some companies as well as some exchange-traded funds looking to compound returns that have outperformed Bitcoin this quarter.

Shares in Nvidia Corp, up 87%, have risen more than Bitcoin since the start of the year, as have some crypto-specific ETFs, such as the Valkyrie Bitcoin Miners ETF (ticker WGMI), which has jumped close to 100%. Levered products are typically outstanding as well, with 1.5x Nvidia and Meta Platforms Inc. ETFs each up more than 100% year-to-date.

But of a handful of major asset classes, Bitcoin remains the standout. Bloomberg data shows that in the commodity world, sugar was the best performer so far this year, up 22%. In bonds, a global inflation-linked total return index is up 4%, while among global equity gauges, the Lao Composite Index is up more than 44% through Thursday.

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

“After the SVB failure and subsequent Signature shutdown, the narrative going into the week was that it would be a difficult period for crypto,” he said. “In fact, these events fueled the narrative of Bitcoin as an alternative to banking solutions, and the entire crypto including BTC had some amazing positive trading days, which was unexpected for many.”