Cryptocurrencies outperformed other asset classes in the first quarter, achieving gains not seen in two years after the FTX collapse. According to a newsletter from IntotheBlock shared with CryptoPotato, Bitcoin and Ethereum experienced their largest quarterly price gains since Q1 2021.
On-chain Review
In March alone, Bitcoin’s market cap increased by 20%, contributing to a positive change of 70% in Q1 2023. Similarly, Ethereum saw a 9% monthly and 49% quarterly surge in market cap. According to the ITV report, «Bitcoin’s outperformance is likely indicative of its growing appeal as a digital store of value, with its correlation with gold prices increasing from -0.3 at the beginning of the year to 0.9 closing the quarter. Ether’s 49% quarterly increase also surpassed many crypto-assets (and certainly stocks), though it has lagged behind Bitcoin since the Silicon Valley debacle and the Fed’s corresponding reaction.”
Additionally, Tether saw a 12% monthly and 20% quarterly change in market cap, as some investors switched from Circle-backed USDC after it was significantly affected by banking sector uncertainties and regulatory scrutiny. USDC’s monthly market cap dropped to 23%, shrinking its quarterly figure to 26%.
Where Next?
Several factors contributed to the strong performance of cryptocurrencies, including the collapse of major firms in the industry and the market rally after three banks failed, which spurred investors to consider Bitcoin a «safe haven» from the traditional financial system. Blockchain data suggests that the current market conditions are uncertain, but Bitcoin and Ethereum are experiencing a large amount of buying activity. ITB’s analysis shows that $27,000 and $1,700 are important levels to watch for Bitcoin and Ether, respectively, since they have the highest concentration of buyers, with 623.8k BTC (approx. $17 billion) and 8.4M ETH (approx. $15.1 billion) being acquired at this level. Additionally, if these levels are breached, the two cryptocurrencies are unlikely to find key support based on previous buying patterns until $24,500 and $1,500 for Bitcoin and Ether, respectively. Although there are both bullish and bearish factors in play, long-term investors are continuing to accumulate, and Ethereum’s Shanghai Upgrade and Bitcoin halving could further catalyze price trajectories in the future, making Q2 interesting, according to ITB.
