According to a report from the New York Digital Investment Group (NYDIG), Bitcoin continues to be the top-performing asset of 2024, even after experiencing a “seasonally weak” third quarter. Despite a modest 2.5% gain during the quarter, the cryptocurrency managed to rebound from a decline in the previous quarter, though it faced significant selling pressure throughout this period. Greg Cipolaro, NYDIG’s head of research, emphasized this in his October 4 report.
“Bitcoin remains the best-performing asset class in 2024, though its lead has narrowed,” Cipolaro stated, noting a year-to-date increase of 49.2%.
Headwinds Impacting Performance
Despite its strong performance, Bitcoin faced several challenges. Notably, distributions from creditors of the Mt. Gox exchange and Genesis amounted to nearly $13.5 billion. Additionally, substantial Bitcoin sales by the U.S. and German governments contributed to market pressure, Cipolaro explained.
Amid these challenges, other asset classes such as precious metals and certain equity sectors have also shown gains, reducing the gap between their performance and Bitcoin’s. Cipolaro remarked, “Most asset classes have had a banner year,” indicating that while Bitcoin’s lead persists, it has diminished as the overall market experiences growth.
Notably, despite typically bearish trends for Bitcoin in September, the cryptocurrency posted a 10% gain that month, defying seasonal expectations. This resilience was partly fueled by rising demand for U.S. spot exchange-traded funds (ETFs), which saw $4.3 billion in inflows during the quarter.
Increased corporate interest in Bitcoin, especially from companies like MicroStrategy and crypto miner Marathon Digital, also contributed to upward momentum. Cipolaro pointed out that Bitcoin’s rolling 90-day correlation with U.S. stocks rose during Q3, ending at 0.46. However, he stressed that this correlation remains relatively low, suggesting that Bitcoin still offers substantial diversification benefits for multi-asset portfolios.
“While Bitcoin’s correlation with equities has increased, it remains low overall, indicating significant diversification advantages,” he noted.
Political Developments and Market Sentiment
Towards the end of Q3, the broader crypto market received a boost from key political developments, including former President Donald Trump’s endorsement of the cryptocurrency industry, monetary easing measures from the Federal Reserve, and stimulus efforts from China’s central bank to enhance liquidity. Cipolaro stated that these factors positively impacted market sentiment.
Looking ahead, Cipolaro highlighted the potential influence of the upcoming U.S. presidential election on market dynamics in Q4. He believes that a victory for Trump could significantly benefit the crypto market.
“While both candidates are likely to be more crypto-friendly than the Biden administration, a Trump win could lead to more substantial gains for the asset class due to his strong 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.
