The bitcoin market has been decimated by the 2022 bear market. Billions were lost from the collapses of major crypto exchanges last year. However, 2023 seems to bring new investor sentiment as the market improves, at least for crypto.

Since the start of this year, the market cap of the crypto market has seen a continuous growth as Bitcoin and Ethereum rallied, pulling the entire market upwards. 

With the broader financial market becoming optimistic for an improving economic situation, crypto has beaten stocks in terms of returns. Will 2023 be the year for crypto? 

Crypto, Gold And Stocks: What’s Up With Them?

According to Bloomberg, the top 100 cryptocurrencies have outperformed both gold and large and mid cap stocks in the first few weeks of January. The MVIS CryptoCompare Digital Assets Top 100 Index returned 6% while gold and the Bloomberg Global Large and Mid Cap Index returned only 3% in the same timeframe. 

Chart: Bloomberg

This is great for cryptocurrencies as 2022 saw the loss of institutional investor confidence in the industry. The recent rally, however, does not prove that crypto is a safe bet against external market forces. 

During the 2021 bull market, banking giant JPMorgan said that Bitcoin has the ability to overtake gold with the asset possibly rising to $146,000 during this period.

However, just like stocks and gold, the crypto market is vulnerable to external market forces and industry debacles as seen with 2022’s historic high-profile collapses that wiped billions off the market. 

Bitcoin and gold. Image: Moralis Academy

With gold being a safe-haven asset, its returns would be more consistent than stocks and crypto. Stocks, which offer varying levels of volatility, is also a safer bet for people with lower-risk tolerance. 

But crypto’s outperformance of gold and stocks may send signals to more financial institutions to make capital flow into the cryptocurrency market, further jacking up the returns. 

Crypto, Stocks To Face Macro Trends Together

With crypto and stocks being more correlated than ever, macro trends will have an effect on both the stock and crypto markets. However, with Morgan Stanley predicting that U.S. stocks will make a drop this week, we might see the crypto market’s returns to emulate or be slightly above the stock market. 

BTC total market cap at $331 billion on the daily chart | Chart: TradingView.com

This week’s Consumer Price Index data release would affect the financial market as a whole. As it stands now, the U.S. Federal Reserve’s interest rate is at 4.5%. The release of last month’s CPI data would determine if the central bank is set to jack up or ease interest rates. 

If ever the economic situation improves, crypto might continue to outrun stocks just like in the 2021 bull market. 

-Featured image by Spencer Lewis



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