The cryptocurrency industry has been experiencing setbacks in recent months, including bankruptcies, lawsuits, regulatory crackdowns, and the influx of meme coins, among others. Despite the troubles, the world’s largest digital currency, Bitcoin (BTC), has been steadily increasing in value, surging by 65% this year. The rise in the digital coin’s value has outpaced that of the S&P 500, which has only gained 7%. Financial experts have weighed in on why it is doing so well, even in the midst of cryptocurrency woes.
The Bitcoin Surge Despite Crypto Woes
Bitcoin has been surprisingly resilient despite the cryptocurrency industry’s troubles. Many experts have attributed its resilience to the “flight to quality” trend in an interview with ABC News.
Amid the crisis, investors are turning to well-known and established cryptocurrencies, such as Bitcoin, rather than unknown or lesser-known coins. Analysts say BTC has become the “household name” of cryptocurrencies, making it a safer bet for investors.
Experts Explain Why Bitcoin is Outpacing the S&P 500
Analysts have pointed to several factors that explain why Bitcoin is outpacing the S&P 500. For one, the broader economy has been favorable to the digital currency, with the Federal Reserve slowing down interest rate hikes, and investors seeking a digital alternative to the traditional banking system. Furthermore, the cryptocurrency industry’s troubles have pushed investors toward the digital currency, which has gained a boost from the unrest.
Investors Seek Familiarity Amid Cryptocurrency Crisis
Another factor contributing to Bitcoin’s surge is the trend toward familiarity. The cryptocurrency crisis has made investors more discerning, and they are seeking well-known and established cryptocurrencies. The crypto, with its name recognition and long history, has become the go-to digital currency for many investors said eToro’s Callie Cox.
Bitcoin’s Boost from Economic Factors
In addition to the aforementioned reasons, Bitcoin’s increase in value can also be attributed to broader economic factors, such as issues in the financial system and a decrease in the pace of interest rate hikes. As traditional banking faces threats, some investors see the crypto as a more reliable alternative according to CoinShares’ James Butterfill. However, experts caution that the rise of Bitcoin could be affected by a potential recession, too, which could bring volatility to the digital currency.
Uncertainty Looms as a Looming Recession Poses Challenges
The future of Bitcoin’s performance is uncertain, with a recession looming on the horizon. While experts remain optimistic about the digital currency’s outlook, a potential recession could pose challenges for it, which is still a relatively new asset. Economic data continues to deteriorate, and if a recession does occur, BTC’s performance could become more volatile.
To sum it all up, Bitcoin has defied the odds by climbing in value despite the cryptocurrency industry’s ongoing troubles. Experts attribute its resilience to a variety of factors, including its name recognition and long history, economic forces such as trouble in the financial system and slowing down of interest rate hikes, and the trend toward familiarity and established cryptocurrencies. Nevertheless, a potential recession looms on the horizon, posing challenges for Bitcoin and its investors.
Giancarlo is an economist by profession with a career spanning nearly two decades. His professional journey has seen him assume vital roles in various government and private organizations such as the Department of the Interior and Local Government (DILG), the National Economic and Development Authority (NEDA), Megaworld Corporation, and the China Banking Corporation in the Republic of the Philippines.
In addition to his civic and corporate pursuits, his forward-thinking approach has led him to manage several prominent websites in the banking and finance sector, notably the Australia-based RateChoice, where he immersed himself in the world of emerging financial technologies and where he found particular interest in Bitcoin all the way back to 2013.
Prior to his addition to Blockzeit’s dynamic team, he held an essential role as Project Manager for initiatives encompassing blockchain, stablecoin, mining, special economic zone development, and iGaming. This noteworthy chapter in his career unfolded under the auspices of InPlan Consultancy Services, Inc., the think-tank of IMPERO Consortium Management Corporation headquartered in Manila, Philippines, and Tokyo, Japan. InPlan, led by a distinguished retired Cabinet member of the Philippines, collaborates directly with IMPERO’s core management team, contributing to strategic planning and business development endeavors.