A cryptocurrency sector battered by turmoil last year is showing some signs of life early in 2023, posting bigger gains than other asset classes like stocks, bonds, and gold.
The MVIS CryptoCompare Digital Assets 100 Index of top tokens is up 7 percent so far this month, exceeding advances of about 2 percent in global stocks, 1 percent in bonds and 3 percent from gold, according to data compiled by Bloomberg.
Bitcoin has kicked off 2023 with a bang. Getty
Global markets are taking heart from the possibility that central banks are closer to calling time on rapid interest-rate hikes as inflation eases from very high levels. Some of that tentative relief has spilled over into crypto, even as the threat of further bankruptcies hangs over the industry after FTX’s collapse.
“There’s a faint heartbeat – the patient’s not dead,” said Tony Sycamore, a market analyst at IG Australia, referring to six straight days of increases in the bitcoin price, the best streak since February 2022. The largest cryptocurrency by market value slumped 64 per cent last year.
“Selling momentum looks exhausted and there’s a better macro environment” but the token needs to scale key technical levels like the 200-day moving average to trigger greater investor interest, Sycamore added.
Some of the sharpest crypto gains lie outside of the largest token bitcoin. Second-ranked ether is up 11 per cent so far this month, after falling 67 per cent in 2022. Solana, a token that shed almost all its value last year because of a link to FTX’s fallen founder Sam Bankman-Fried, has added over 60 percent in the early days of January.
An upgrade of the ethereum blockchain, crypto’s major commercial highway, is also generating optimism. The upgrade, called Shanghai, may materialize in March. It will allow investors to withdraw ether they locked up to help operate the network. The latter process is known as staking and earns rewards.
Some crypto protocols seek to provide easier and more flexible access to staking rewards, and coins linked to them have surged. Examples of such so-called liquid staking tokens include StakeWise’s SWISE, Lido DAO and Rocket Pool’s RPL, which are up 113 per cent, 107 per cent and 21 per cent respectively in January, according to data from CoinGecko.
Bitcoin rose as much as 2 percent on Monday and was trading at $17,233 as of 10:23 am in New York, a three-week high. Solana added about 20 percent and Cardano 12 percent.
Coinbase Global and Riot Platforms led cryptocurrency-exposed stocks higher amid the digital-asset bounce. Coinbase jumped 13 percent on Monday. It has tumbled 86 percent in 2022. Riot, which dropped blockchain from its name last week, gained 13 percent. The shares plunged 85 percent last year.
Bitcoin and the gauge of top 100 digital assets sank over 60 per cent in 2022, hurt by sharply tightening monetary policy and a series of blowups culminating in the unraveling of the FTX exchange, which owes billions of dollars to customers.
Trading volumes crashed and volatility ebbed as investors fled, highlighting lingering worries about the risk of further bankruptcies in the contagion from the alleged fraud at FTX.