With a strong start to 2023, Bitcoin (BTC) has recovered from a year-long slump.
According to data from CoinDesk, the top cryptocurrency by market value has increased by about 72% to $28,500 this year, marking its greatest quarterly rise in two years. The price surge has increased the market worth of cryptocurrencies to $542 billion.
Three months ago, some experts were speculating that bitcoin could drop to as low as $12,000 this quarter after losing 76% of its value since November 2021.
A 50% quarterly gain now seems likely for ether, the second-largest cryptocurrency by market value, thanks to the rebound, which has put bitcoin ahead of it. The tech-heavy Nasdaq index on Wall Street has risen 15% while gold has increased by almost 7%.
The belief that central banks, led by the Federal Reserve, will halt their aggressive rate rises in reaction to signs of a recession has contributed significantly to the recovery.
Early this month, following the failure of three American banks and the central bank's implementation of emergency funding initiatives to quell the banking sector's fear, the so-called Fed pivot expectations increased. The central bank just added $300 billion to its balance sheet, erasing months of quantitative tightening. Futures traders predict that the Fed will decrease rates by 25 basis points in June to start an easing cycle.
Martin Leinweber, digital assets product strategist at MarketVector Indexes, told CoinDesk TV:
"It's all about expectations of new easing measures by central banks, especially the Fed. Among all risk assets, bitcoin stands out as being the most sensitive to liquidity swings."
According to David Foley, managing partner at Bitcoin Opportunity Fund, assets like gold and bitcoin that have sound money appeal are gaining from the liquidity injections.
"With the Fed suddenly turning on a dime, having to throw some QE back into the system to protect the banking system, money flows into sound money assets: gold, silver. And bitcoin being sound money is going to be the fastest in the race."
...Foley said on CoinDesk TV, referring to quantitative easing.
According to some analysts, the deeper order book of bitcoin has a greater impact on the price increase.
Order book depth describes how simple or challenging it is to enter and exit from major traders at steady pricing. With FTX's demise, the depth has progressively decreased and early this month hit a 10-month low. To put it another way, a modest purchase order now has a more positive effect on prices.
Connor Ryder, an analyst at Paris-based crypto data provider Kaiko, wrote in a recently published analytics piece:
"In this instance, the narrative of bitcoin as a hedge against financial calamity gave BTC the push it needed. But there was little upside resistance to hurdle over."
