Despite Bitcoin’s (BTC) volatile price action, the world’s largest cryptocurrency has outperformed every other asset, including gold. Although it trades below its psychological milestone of $30,000 at $29,000, Bitcoin is expected to continue growing in 2023 as it acts as a safe haven for investors amid the US banking crisis.
Bitcoin reigns supreme as the best performing asset
Capriole Investment, which provides research and analysis on cryptocurrencies reported which the current market cycle favors hard assets like gold, as indicated by the 200-week gold-to-stock ratio. This classic indicator shows 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 amid the US banking crisis and fiat currency weakness. During this period of high correlation, Bitcoin has outperformed gold by 10x by 2023, making it the best performing asset of the year among major asset classes.
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 looming de-dollarization, the market is turning to these safe havens to protect their wealth.
According to Capriole Investment’s report, the current Bitcoin rally in 2023 is believed to be organic and mock-driven. The report highlights a key metric that shows the total open interest of futures as a ratio of the total market capitalization of Bitcoin and USDT.
This statistic provides insight into market leverage and shows that crypto market leverage peaked with the FTX fraud in November 2022. Since then, this ratio has declined in one direction, despite Bitcoin’s price falling by more than 80%. % increased 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 peaks or Bitcoin’s dominance spikes, the basis for sustainable price appreciation remains. 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.
In addition, the report suggests that the decrease in leverage points to a healthy market that is less vulnerable to sudden price drops. This is because high levels of leverage can often lead to market instability, causing sharp price swings and potentially leading to a market crash.
BTC’s $30-32K Dilemma
According to the report, Bitcoin is trading within its largest technical resistance block on the chart since USD 20,000. This region, which ranges from $30,000 to $32,000, represents the bottom of the 2021 range and the point where the bear market begins in 2022.
In addition, it is an important weekly order block level and Fibonacci extension level from the previous cycle. $30,000 is also an important 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 on $16,000.
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 closed above $32,000 weekly, it wouldn’t be surprising if a new trend took its price to $40,000.
Featured image of Unsplash, chart from TradingView.com
