Bitcoin remains the top-performing asset of 2024, even after navigating a “seasonally weak” third quarter, according to a report from the New York Digital Investment Group (NYDIG).
Despite a modest 2.5% gain over the quarter, the cryptocurrency managed to recover from its previous decline in the second quarter, though it faced considerable selling pressure throughout the period, noted NYDIG’s head of research, Greg Cipolaro, in an October 4 report.
“Bitcoin is still the best-performing asset class in 2024, but its lead has narrowed,” Cipolaro stated, highlighting a year-to-date increase of 49.2%.
Bitcoin Faces Several Headwinds
While Bitcoin’s performance remains strong, it faced challenges from several headwinds, including creditor distributions from the Mt. Gox exchange and Genesis, totaling nearly $13.5 billion.
Additionally, significant sales of Bitcoin by the United States and German governments contributed to the market pressure, Cipolaro explained.
Amid this turbulence, other asset classes like precious metals and certain equity sectors have also posted gains, narrowing the gap between their performance and that of Bitcoin.
“Most asset classes have had a banner year,” Cipolaro noted, emphasizing that Bitcoin’s lead, while still present, has diminished as the broader market has also seen growth.
Despite a typically bearish trend for Bitcoin in September, the digital asset managed a 10% gain during the month, defying seasonal expectations.
This resilience was partly driven by growing demand for U.S. spot exchange-traded funds (ETFs), which accumulated $4.3 billion in inflows throughout the quarter.
Moreover, increased corporate interest in Bitcoin, notably from companies like MicroStrategy and crypto miner Marathon Digital, added to the upward momentum.
Cipolaro also pointed out that Bitcoin’s rolling 90-day correlation with U.S. stocks rose during the third quarter, ending the period at 0.46.
However, he emphasized that the correlation remains relatively low, suggesting that Bitcoin still offers substantial diversification benefits for multi-asset portfolios.
“While Bitcoin’s correlation with equities rose, the most recent level is still low, implying that Bitcoin offers significant diversification benefits to multi-asset portfolios,” he said.
The broader crypto market received a boost towards the end of Q3, driven by key political developments.
These included former President Donald Trump’s endorsement of the cryptocurrency industry, monetary easing measures by the Federal Reserve, and stimulus efforts from China’s central bank, which aimed to increase liquidity.
According to Cipolaro, these factors helped buoy sentiment within the market.
Upcoming Presidential Election to Influence Markets
Looking ahead, Cipolaro highlighted the potential impact of the upcoming U.S. presidential election on November 5, which he believes could significantly influence market dynamics in the fourth quarter.
He suggested that a victory for Trump might drive larger gains for the crypto market.
“While both candidates will be improvements over the Biden administration regarding their attitude towards crypto, Trump, if he wins, will deliver bigger gains for the asset class given his full-throated endorsement of the industry,” Cipolaro wrote.
He concluded by noting that Q4 is traditionally a bullish period for Bitcoin, with several factors potentially aligning to support further gains.
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