Bitcoin supplants traditional assets, including gold and tech stocks

Bitcoin (BTC) – Credit: Shutterstock

About 41k$, Bitcoin has risen by more than 10% in one weekthe possible sign of a accumulation in thewait of theapproval of a ETF. Kaiko also observes a decrease of risks. This rally can last ?

The Bitcoin price (BTC) broke through the $41,000 level on December 4, and even provisionally through $42,000 on the same day. At the time of writing, the price of the leading crypto asset remains at around $41,500, down 0.4% over 24 hours.

Bitcoin has returned to a level not seen since April 2022 thanks to a one-week rise of 13%, calculates Kaiko in the latest edition of its Data Debrief. This performance enabled the token to outperform most traditional assets over 7 days, including gold and technology stocks.

Volatility down steadily since the summer

Over 2023 as a whole, Bitcoin will be one of the best-performing stocks in terms of adjusted risk. Crypto performs several feats, resisting the dollar’s appreciation and the rise in risk-free rates in the third quarter.

On the basis of the Sharpe ratio – which measures the compensation perceived by investors for volatility, i.e. risk – Kaiko highlights the very good results recorded by BTC. To explain this, analysts point to the steady decline in the volatility.

This summer, volatility was at its lowest level for several years. This factor “has probably contributed to this trend”, they say. Other growth drivers also need to be taken into account.

ETFs and the macroeconomic environment as levers

The first has already been identified since October: the growing enthusiasm of institutions for the possible approval of a spot BTC ETF. The recent improvement in the macroeconomic environment has also contributed to Bitcoin’s appreciation.

These gas pedals have in fact contributed to the strong influx of capital into BTC investment products in recent weeks. Another example is Grayscale’s Bitcoin Trust:

Grayscale’s discount to its underlying BTC holdings fell to 8% last week, its lowest level since mid-2021, as discussions on converting GBTC to an ETF continue,” comments Kaiko.

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Growing interest in derivatives

BITO, the first US ETF backed by futures contracts, is also a hit with investors, like RoyalsBlue.com wrote last week. The fund has reached an all-time high in terms of assets under management.

This surge should be tempered, however. Indeed, “most analysts expect it to suffer outflows in the event of a green light for an alternative to BTC” in the form of a spot ETF.

Another indicator to consider is institutional interest in derivatives markets. In this sector, the CME recently replaced Binance as the largest market for BTC futures.

Cash markets on the upswing

Kaiko also notes “renewed interest” in cash markets, “after months of sluggish trading activity”. In November, daily trading volumes reached their highest ATH level in seven months.

Finally:

The average transaction size on US exchanges also increased. Interestingly, it remained volatile on offshore exchanges, increasing on OKX while declining on Binance and Huobi.”

The question naturally arises as to how long this Bitcoin recovery will last. But it is difficult, if not impossible, to provide an answer. For Kaiko, a relevant analysis must await a decision on cash ETFs.

And until then? Let’s make the most of it while the recovery lasts, pragmatically recommends the Data Debrief.

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