Bitcoin (BTC) is making a comeback in 2023 after a tumultuous 2022, and it’s turning out to be a lucrative investment option that’s outperforming traditional finance products. While Bitcoin and traditional investments showed similar movements in the past year, the cryptocurrency has now surged, recording significant returns.
In particular, data acquired and analyzed by Finbold shows that as of Q1 2023, Bitcoin’s return on investment (ROI) was 170.32% higher than the average of five major stock indexes. During the quarter, Bitcoin’s returns were at 69.4%, while average returns for the indexes were at 5.5%.
The stock indexes that were compared with Bitcoin’s ROI showed mixed results. NASDAQ Composite (IXIC) had the highest return at 17.39%, followed by S&P 500 (SPX) at 6.36%. US Small Cap 2000 (RUT) ranked third with 2.51% returns. Meanwhile, FTSE 100 (FTSE) had a 0.99% ROI and ranked fourth, while Dow Jones Industrial Average (DJI) had the lowest return of 0.56%, placing it in fifth place.
Bitcoin Outperforms Indexes Due To Banking Crisis
Bitcoin’s excellent performance in 2023 can be linked to multiple factors, with the turmoil in the banking sector being one of the most notable. During this period of chaos in traditional banking, investors found solace in the cryptocurrency sector as an appealing option to traditional centralized monetary systems.
Investors flocked towards Bitcoin, resulting in significant capital inflows into the asset, as the market capitalization of significant banks decreased in Q1.
Investors were reminded of the potential flaws in the U.S. banking system and the dollar that backs it after the high-profile collapse of Silvergate Bank, Silicon Valley Bank, and Signature Bank. This led to a shift towards Bitcoin as investors sought refuge from these structural deficiencies.
Those who believe in Bitcoin claim that the banking crisis highlighted the asset’s original purpose: to provide a way for investors to protect themselves from central bank actions like quantitative easing and relaxed monetary policies that lower the value of fiat currency. They also emphasize Bitcoin’s limited supply as a significant feature that makes it a valuable store of value.
It’s interesting to note that the U.S. dollar’s purchasing power has been decreasing over the years, while Bitcoin’s has been rising since 2010.
This trend has partly helped Bitcoin, especially with the increasing likelihood that the Federal Reserve will slow down interest rate hikes following data that indicates the institution is winning the battle against inflation.
This year, Bitcoin has also had a fantastic run, standing out from traditional investment products. In 2022, high inflation and continued interest rate increase hit both asset classes hard. It’s important to remember that Bitcoin and traditional investment indexes belong to different asset classes. The indexes represent for-profit companies with real products and services, while Bitcoin is a virtual asset.
What Next For Bitcoin
Bitcoin followers are optimistic about the upcoming month of April, which historically has been an excellent time for cryptocurrency. There’s even talk that it might push past the resistance level of $30,000.
Despite the Commodity Futures Trading Commission (CFTC) legal issues faced by the Binance crypto exchange, investors are still feeling confident about the future of Bitcoin. This resilience is excellent news for the entire industry since it shows that the asset’s future isn’t solely dependent on one exchange.
But let’s not get too ahead of ourselves. It’s worth keeping in mind that rising inflation is still a significant hurdle, so there is still some uncertainty surrounding the future of Bitcoin.