NYDIG Research notes that Bitcoin rose 2.5% in the “seasonally weak” Q3 of this year as the digital asset bounced back from a decline in Q2.
NYDIG Research pointed out that Bitcoin (BTC), the flagship cryptocurrency, is still the “best performing” asset/asset class during 2024, up a considerable 49.2%, but the year continues to be a “banner year,” again, for many asset classes.
The NYDIG Research team added that the emergence of large holders either selling or distributing bitcoins put a “damper” on bitcoin this quarter.
The research report from NYDIG added that spot ETFs continued to add to their bitcoin balances during the quarter, adding a substantial $4.3B worth to their custody balances.
Led by MicroStrategy, a relatively small but growing cadre of public firms continues to add bitcoin, the leading digital currency, to their balance sheets during Q3 2024.
As stated in the research report shared by NYDIG, reports of BNY’s SAB 121 exemption have reignited in the industry amongst traditional financial players.
The report pointed out that the US presidential election is “front and center” for bitcoin investors, but whichever candidate wins will be a net positive for the industry (arguably).
The research study from NYDG also mentioned that most of the large seller overhangs are now behind us except for governmental holdings and the final Mt Gox repayments, which could take some time.
The report added that Bitcoin has managed to bounce back after falling in Q2, up 2.5% in Q3.
The researchers at NYDIG also noted that while bitcoin was up on the quarter, they’d classify most of the trading action since the March 2024 all-time high as largely “rangebound.”
The report further noted that Bitcoin (BTC), the pseudonymous virtual currency, has traded in a range between $70K and $54K for much of the past 6 months, “unable to make a decisive move one way or the other.”
The report also stated that at play during the quarter was the (near) resolution of numerous bankruptcies, such as the long-running Mt Gox bankruptcy, which saw billions in bitcoins give back to creditors.
The report addedthat the US government and German authorities (BKA) were also notable sellers during the quarter.
Although these overhangs at times weighed on bitcoin’s price, their conclusion from trading action is that the “fear” of these coins potentially coming to market weighed on the price of bitcoin more than the actual selling.
Unfortunately for bitcoin investors, many other traditional asset classes fared better during the quarter as lower interest rates “outweighed recessionary fears.”
There was a considerable rotation this quarter as tech and large cap growth stocks, which have outperformed for several years, underperformed utility stocks, real estate, and small cap value stocks. Gold continued its run, setting new all-time highs for the asset.
Bitcoin is still the best performing asset (class) in 2024, but its “lead has narrowed.”
The research report also noted that the volatility has spiked this year (in August, the VIX hit levels only seen 3 times previously in its history) and other asset classes, such as precious metals and certain equity industries have gained on the asset.
Still, most asset classes are having a banner year, again. 2023 saw significant returns for stocks and precious metals as well. 2024 seems to be playing out the same way that 2023 did.
The third quarter is usually bitcoin’s weakest, (using median return – averages are skewed by outliers) so the “slight gain the asset put up this quarter isn’t surprising.”
Bitcoin typically struggles throughout the summer months and this year was no exception. Bitcoin did, however, buck normal trends in September, “putting in a gain, while the month is typically its weakest.”
Bitcoin’s rolling 90-day correlation with US stocks continued to rise during Q3, “ending the quarter at 0.46.”
Although bitcoin’s correlation with equities rose, the most recent level is still low, implying that bitcoin offers significant diversification benefits to multi-asset portfolios. Thinking of bitcoin as a “levered US equities” is incorrect as the long-term average of its 90-day rolling correlation is only 0.12.
The report from NYDIG further noted that the world’s money supply, global M2, continues to hit new all-time highs, a trend likely to continue as the US and China employ looser monetary policies.
Although not a “perfect fit” with bitcoin price, the two do seem to have some relationship over the past 7 years.
The report also stated that this isn’t an entire surprise as “a fixed supply asset like bitcoin should be the beneficiary of expansionary monetary policies.”
The chief antagonist of bitcoin markets in Q3, “large sellers, are mostly behind us now.”
All the bankruptcies in 2022 have “paid back creditors or are about to do so, as in the case of FTX,” the report added.
The FTX creditor distributions, however, will be carried out via cash and the 21.4K bitcoins the estate held a year ago have “likely been converted into cash at this point.”
Given this, the FTX creditor distributions might just end up being a “net positive” for bitcoin as digital asset investors get cash back that they may put to work in the market, instead of an overhang, the report explained.
The NYDIG team also noted that the remaining Mt Gox coins, creditors who have elected for final repayments, will have to wait until the “finality of the bankruptcy,” which could potentially take many more months in order to fully resolve.