Leader Bitcoin Narrows But Still Beats Other Assets Despite Q3 Recession: NYDIG

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According to a recent note from the research division of New York Digital Investment Group (NYDIG), Bitcoin remains the best-performing asset class in 2024 despite a modest third quarter. The crypto’s year-to-date alpha gains of 49.2% still outperform other assets, although its lead has narrowed amid significant market challenges.

NYDIG head of research Greg Cipolaro noted in an Oct. 4 report that Bitcoin gained just 2.5% in Q3, rebounding from Q2 losses but constrained by significant selling. The asset faced headwinds from distributions from lenders Mt. Gox and Genesis totaling nearly $13.5 billion, as well as large sales of Bitcoin by the US and German governments.

Despite these challenges, Bitcoin bucked seasonal trends with a 10% gain in September, typically a bear month. Cipolaro pointed to continued demand from U.S. exchange-traded funds (ETFs), which gathered $4.3 billion in total inflows for the quarter, as a supportive factor. Increased corporate ownership from firms such as MicroStrategy and Marathon Digital also supported Bitcoin’s performance.

Post-T3 recovery period

The price of the cryptocurrency has shown signs of recovery in recent days, climbing 3.06% in the last 24 hours to $63,905 on Monday morning in Hong Kong. This increase coincided with the release of positive US jobs data, which showed 254,000 jobs added in September, beating forecasts and fueling optimism about the US economy.

Cipolaro also noted that Bitcoin’s 90-day correlation with US stocks continued to rise in Q3, ending the quarter at 0.46. However, he argued that Bitcoin still offers significant diversification benefits to multi-asset portfolios due to its relatively low correlation with other asset classes.

The research highlighted that other assets, such as precious metals and certain equity industries, saw gains against Bitcoin, with most asset classes having a “banner year”. This reduction in Bitcoin’s edge underscores the competitive nature of today’s investment landscape.

The impact of US jobs data and the election on the Bitcoin market

Looking ahead, Cipolaro expects Q4 to be traditionally bullish for Bitcoin, with some potential catalysts on the horizon. The upcoming US election on November 5 is expected to play a significant role in the market’s performance, with Cipolaro suggesting higher gains if former president Donald Trump, who has embraced the crypto industry, wins.

“While both candidates will be improvements over the Biden administration in terms of their stance on crypto, Trump, if he wins, will deliver greater gains for the asset class given his full support of the industry,” he Cipolaro said.

Additionally, factors such as global monetary easing and China’s stimulus measures could further influence Bitcoin’s trajectory in the coming months. Cipolaro reassured investors, saying that while investors “might be frustrated with the range trading over the last 6 months,” the fact remains that “Bitcoin is exactly where it’s been right now for the last two.”

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