Bitcoin’s Market Cap Increases by $194 Billion in 2023, Outperforming Top Wall Street Banks
Bitcoin (BTC) has experienced a 66% year-to-date growth, adding $194 billion to its market capitalization in 2023. This growth has considerably surpassed the year-to-date performance of top Wall Street banks, particularly amid rising concerns of a global banking crisis.
Decoupling from US Stocks
The price of Bitcoin has decoupled from United States stocks for the first time in a year. As of March 2023, Bitcoin’s price has skyrocketed by about 65%, compared to the S&P 500’s 2.5% gains and Nasdaq’s 15% decline. This trend is indicative of Bitcoin as an alternative investment asset, especially in a time when confidence in traditional financial markets is dwindling.
Wall Street Banks Struggle to Maintain Valuations
The six largest U.S. banks, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Morgan Stanley, and Goldman Sachs, have cumulatively lost nearly $100 billion in market valuation since the start of 2023, according to data gathered by CompaniesMarketCap.com. With a YTD drop of nearly 17%, Bank of America’s stock is the worst performer among Wall Street banks. Goldman Sachs comes in second, with nearly a 12% YTD decrease, followed by Wells Fargo (9.74%), JPMorgan Chase (6.59%), Citi (3.62%), and Morgan Stanley (0.84%).
Regional Banking Collapse
The decline in US bank valuations can be attributed to the ongoing regional banking collapse fueled by the closure of several banks that were overexposed to risky assets. This includes the recent announcement of Silvergate, a crypto-friendly bank, closing its doors, followed by regulators’ takeover of Signature Bank and Silicon Valley Bank.
The crisis continued with the near-collapse of First Republic Bank, which was saved at the last moment through a $30 billion combined injection by Wells Fargo, JPMorgan Chase, Bank of America, Citigroup, and other banks.
Bitcoin’s Resilience During Financial Crises
The rise in Bitcoin’s value amid a growing U.S. banking crisis mirrors earlier occurrences during banking collapses in Cyprus and Greece. In 2013, during the Cyprus financial crisis, Bitcoin’s value rose by up to 5,000%, triggered by the exposure of Cypriot banks to overleveraged regional real-estate companies. The situation was so dire that Cyprus authorities had to close all banks to avoid a bank run.
In 2015, during the Greek financial crisis, Bitcoin’s value gained 150% when Greece faced a similar crisis and imposed capital controls on its citizens to avoid a bank run. These events demonstrate that Bitcoin has become an attractive asset for investors during times of economic upheaval.
Hedge Against Systemic Risks
Bitcoin’s recent streak of impressive growth can be attributed to a wide range of factors, including its growing adoption as a payment method, heightened institutional adoption, and limited supply. However, fears of a global banking crisis and declining real interest rates may have boosted its value further. As Ilan Solot, co-head of digital assets at London broker Marex, noted, “Fears over the stability of the banking system, along with declining real interest rates, creates a good environment for Bitcoin to rebound.”
Bitcoin’s outstanding growth in value in 2023 has far outpaced that of Wall Street banks, which are struggling to maintain valuations amid the regional banking collapse. Bitcoin’s decoupling from US stocks and resilience during past financial crises make it an attractive asset for investors during times of economic uncertainty. With the possibility of further crises looming, investors may continue to flock to Bitcoin as a hedge against systemic risks.