Cryptocurrency has gained almost $50bn in total market capitalization since January 1st, making it one of the best performing asset-classes of 2019. Digital assets are growing faster than the world’s largest stock indices and providing a far more positive outlook than the bond market.
The Cryptocurrency Index 30 (CCI30), which tracks the 30-largest cryptocurrencies by market cap, has increased by more than 40% since the start of the year. The currencies tracked by the index constitute 89.9% of the total market capitalization.
Although the CCI30 started the year on a downtrend, it soon reversed. Cryptocurrencies recouped most of their losses by the middle of February, and have slowly risen ever since.
As the graph below shows, the ‘bitcoin boom‘ had a significant effect on the CCI30, which increased nearly 20% since April 1st.
Red arrow demarcates the start of the year. Source: cci30.
Meanwhile, growth on the global stock market trails behind. According toThe Financial Times, the Dow Jones Industrial Average and the S&P 500 have increased by 12.3% and 13.4%, respectively, since the start of the year. The Nikkei 225 grew a little less, at 11%; London’s FTSE 100 trails at 8%; and the NASDAQ Composite, which is heavily weighted towards tech stocks, experienced the largest growth, up 16.3%.
Source: FT
On average, these five indices have grown by 12% since January 1st, about a quarter of the growth of the CCI30 during the same timeframe.
Is crypto winter over?
The latest bear market is the longest on record. Beginning on January 7th, 2018, when crypto’s total value peaked at $820bn, the market slid for 450 days. The slide beat the previous bear trend, which lasted for approximately 420 days.
This isn’t the first time end crypto winter has supposedly ended, but there are promising signs. Market sentiment has slowly been improving over the past three months, as evident in a gradually rising support level. The near-horizontal resistance level indicates that selling pressure did not increase.
Source: TradingView
The price of Bitcoin, which continues to make up more than 50% of the crypto market cap, recently exceeded its 200-day moving average for the first time since February 2018. Known as a “golden cross”, this is a bullish signal that momentum is building and could be a sign that the uptrend might continue.
Considering its relative size, this might also represent improving sentiment across the wider digital asset market.
The red circles show just how long ago the last ‘golden cross’ was. Source: TradingView
Recession-proof?
It’s still too early to tell if winter is truly over. But as the data show, 2019 has been a good year for virtual currencies, with sentiment increasing since January.
This coincides with increasing concerns over a possible recession in the traditional markets. Although equities have been on a decade-long bull run, the recent inversion of the U.S. Treasury yield curve has spooked investors.
Crypto was born in a recession, but it has never been through one. The question on every mind is how it will behave in the next economic downturn. Independent of centralized entities, with a price determined entirely by the free market, cryptocurrencies could be suitable hedges against uncertain times.
If the cracks start to widen beneath traditional markets, investors might start moving more value into digital assets. Should a recession arise, crypto spring might turn into crypto summer.
The author is invested in digital assets, including BTC which is mentioned in this article.
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