Bitcoin (BTC) has begun 2023 with a bang, marking a positive turnaround from a year-long swoon.

The leading cryptocurrency by market value has added almost 72% to $28,500 this year, its best quarterly gain in two years, CoinDesk data show. The price rally has lifted the cryptocurrency's market value to $542 billion.

Just three months ago, some experts were mulling the possibility of bitcoin falling to as low as $12,000 this quarter, after its valuation had declined by 76% since November 2021.

The rebound has put bitcoin ahead of ether, the second-largest cryptocurrency by market value, which appears on track for a 50% quarterly gain. Gold has added over 7%, while Wall Street's tech-heavy index Nasdaq has rallied 15%.

Much of the rebound has been fueled by speculation that central banks, led by the Federal Reserve (Fed), will abandon their aggressive rate increases in response to recession signals.

The so-called Fed pivot expectations strengthened early this month after three U.S. banks collapsed and the central bank launched emergency funding programs to arrest panic in the banking sector. The central bank's balance sheet has recently expanded by $300 billion, undoing months of quantitative tightening. According to Fed funds futures, traders now see the Fed beginning an easing cycle in June with a 25 basis point rate cut.

"It's all about expectations of new easing measures by central banks, especially the Fed," Martin Leinweber, digital assets product strategist at MarketVector Indexes, told CoinDesk TV. "Among all risk assets, bitcoin stands out as being the most sensitive to liquidity swings."

David Foley, managing partner at Bitcoin Opportunity Fund, said assets with sound money appeal, like bitcoin and gold, are benefitting from the liquidity injections.

"With the Fed suddenly turning on a dime, having to throw some QE back into the system to protect the banking system, money flows into sound money assets: gold, silver. And bitcoin being sound money is going to be the fastest in the race," Foley said on CoinDesk TV, referring to quantitative easing.

Some observers say bitcoin's worsening order book depth has played a bigger role in the price surge.

Order book depth refers to how easy or difficult it is to get in and out of large traders at stable prices. The depth has steadily dwindled since the collapse of FTX and reached a 10-month low early this month. In other words, a small buy order now has a bigger bullish impact on prices.

"In this instance, the narrative of bitcoin as a hedge against financial calamity gave BTC the push it needed. But there was little upside resistance to hurdle over," Connor Ryder, an analyst at Paris-based crypto data provider Kaiko, wrote in a recently published analytics piece.