Bitcoin’s 2023 Rally Drives Stock Market Gains

In 2023, Bitcoin experienced a significant rally that had a substantial impact on the stock market. This rally led to some of the biggest gains in the market, with stocks such as Coinbase, MicroStrategy, and the Grayscale Bitcoin Trust rising more than 300% in value. These stocks were among the top performers in the U.S. stock market for the year.

Despite Bitcoin’s rally, it still fell short of its all-time high, which was recorded in November 2021 at nearly $69,000. However, its performance was impressive, with its value increasing to $42,683 by the end of the year.

One of the key factors contributing to Bitcoin’s rally was the easing of interest rate hikes by the Federal Reserve. This created a more attractive environment for riskier investments. Additionally, the upcoming Bitcoin halving, which is scheduled for May 2024, also played a role in boosting investor confidence. During the halving process, the reward for mining Bitcoin is cut in half, which helps to cap the supply of Bitcoin.

Another factor that contributed to the rally was the potential for an influx of Bitcoin exchange-traded funds (ETFs) in the coming year. These ETFs would provide investors with a more accessible way to invest in Bitcoin, further driving up demand and increasing its value.

Marathon Digital, a mining firm, was one of the biggest beneficiaries of Bitcoin’s rally. The company’s stock price surged by 688% during the year, making it one of the best-performing stocks closely tied to Bitcoin. Marathon’s success can be attributed to its ability to sell equity and avoid taking on debt, except for a convertible note.

Despite the challenges faced by Marathon in the previous year, including a significant loss due to tumbling Bitcoin prices and a power outage at its facility in Montana, the company managed to turn things around in 2023. Marathon reported a net income of $64.1 million in the third quarter, with revenue increasing to $97.8 million. The company is now focusing on expanding its mining portfolio and exploring new revenue streams.

Coinbase, the largest publicly traded crypto exchange in the U.S., also experienced significant growth during the year. Its stock price soared by 386%, making it the best-performing crypto stock in the U.S. market. Coinbase’s growth can be attributed to its ability to capture market share during non-U.S. trading hours, as well as its diversification efforts.

Coinbase’s revenue is no longer solely dependent on Bitcoin transactions, with Ethereum accounting for 18% of its transaction revenue in the third quarter. Other cryptocurrencies also contributed to the company’s revenue, further reducing its reliance on Bitcoin. Additionally, Coinbase’s interest income and stablecoin revenue increased due to higher interest rates, further boosting its revenue.

The Grayscale Bitcoin Trust, a closed-end fund that allows investors to passively own Bitcoin, also experienced significant growth during the year. Its stock price increased by 330%, making it one of the top-performing stocks in the crypto market. The trust’s growth can be attributed to the prospects of it converting to an exchange-traded fund (ETF) in the near future.

Investors have been eagerly awaiting the approval of Bitcoin ETFs, as they would provide a more accessible way to invest in Bitcoin. The Securities and Exchange Commission (SEC) has been actively engaging with asset managers regarding the issuance of Bitcoin ETFs, which has further fueled investor interest in the market.

Overall, Bitcoin’s 2023 rally had a significant impact on the stock market, with stocks closely tied to Bitcoin experiencing substantial gains. The easing of interest rate hikes, the upcoming Bitcoin halving, and the potential for Bitcoin ETFs all contributed to the rally. As more institutional money flows into Bitcoin, it is likely that we will continue to see significant growth in the market.