On Thursday (March 23), Galaxy Digital Founder and CEO Mike Novogratz called Bitcoin “a report card on monetary policy and financial stability” and said that — according to his firm’s research — “on a risk-adjusted basis, BTC is the best-performing asset of the year, outpacing growth stocks, banks, and major stock benchmarks.”
According to a research note sent by Galaxy Digital to its clients and counterparties on Monday, March 20, 2023, Bitcoin has surged more than 45% since the closure of Silicon Valley Bank on March 10 due to the banking crisis. The note examines key on-chain metrics, Bitcoin’s performance compared to other asset classes, and potential catalysts for continued growth.
Galaxy Digital’s research shows that Bitcoin has outperformed a range of assets, including equities, fixed-income securities, indices, and commodities, on a risk-adjusted basis (Sharpe ratio). It has also seen its correlation to equities decline and its correlation to gold, a traditional safe-haven asset, increase significantly since the onset of the banking crisis.
The research also indicates that the Bitcoin rally is driven by spot accumulation rather than levered speculation via futures. On-chain data reveals ongoing accumulation, with more than 45 million addresses holding Bitcoin and a rising number of “accumulation addresses” that have only received Bitcoin and never spent it. In addition, long-term holders are holding longer, as evidenced by the supply age distribution, with more than 66% of Bitcoin’s supply not moving in over a year.
Interestingly, exchange balances have decreased since early 2020, with balances held in exchange addresses now at their lowest point since March 2018.
The research highlights two primary supply events on the horizon: the upcoming Bitcoin halving in April 2024 and the distribution of claims related to the Mt. Gox bankruptcy.
The note mentions that the 2024 halving, which will bring the network’s inflation rate below 1%, could catalyze another bull run. However, skeptics argue that the decrease in new daily issuance may be less impactful than expected.
The Mt. Gox bankruptcy trustee holds 141,686 BTC, but based on Galaxy Digital’s research, it is not expected to result in a material supply event for Bitcoin, as most BTC is unlikely to be sold upon distribution.
Finally, public bitcoin miners, who make up roughly 25% of Bitcoin’s network hashrate, have shifted from a pure HODL strategy to a more balanced approach, selling coins to meet operational expenses at a minimum. This could mean less sell pressure from miners in 2023 compared to 2022.
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