Despite the U.S. government’s tougher regulatory stance, cryptocurrency markets rose on Thursday.
At around 7:45 a.m. ET, bitcoin increased by 2.4% to $24,579.55, while ether increased by more than 1% to $1,686.87, according to Coin Metrics.
According to Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, there are “increasing signs that the market bottomed last November and has turned bullish,” he told CNBC.
“We are gaining in momentum here and any bad news is being shrugged off, typical signs that the market believes the worst is over.”
Early this week, the cryptocurrency markets were tense due to increased regulatory scrutiny of digital currencies by US authorities.
Paxos was instructed to stop creating new Binance USD (or BUSD) stablecoins on Monday by the New York State Department of Financial Services. A stablecoin is a type of cryptocurrency that is linked to a physical asset, and some of them are backed by bonds or cash. BUSD and the USD are directly correlated.
The Securities and Exchange Commission has informed the company that it may recommend an action alleging that BUSD is a security, according to Paxos, which has also been confirmed. Paxos has not yet been officially charged by the SEC.
On Thursday, the price of bitcoin reached its highest point since the middle of August 2022. After turmoil that resulted in bankruptcies, failed projects, and companies, the cryptocurrency market lost close to $1.4 trillion last year. The failure of important exchange FTX was the cherry on top of everything else.
In the wake of the regulatory action, according to Yuya Hasegawa, an analyst at the Japanese cryptocurrency company Bitcoin Bank, there is a shift from so-called altcoins, or alternative coins, to bitcoin.
“Wednesday’s crypto rally was a bit of a surprise but one thing stood out: it was led by bitcoin,” Hasegawa told CNBC.
“The current regulatory environment surely looks like a headwind for the crypto market, but it seems like some money is moving from altcoins to bitcoin, since bitcoin is the only cryptocurrency that is labeled ‘commodity’ by the SEC chair. Consequently, bitcoin’s market dominance is on the rise.”
The SEC’s chairman, Gary Gensler, reaffirmed last year that the organization sees bitcoin more as a commodity than a security. Gold is an example of a commodity, whereas stocks are thought of as securities. They are governed in various ways.
The Federal Reserve’s increasing interest rates to combat inflation also had an impact on the price of cryptocurrencies. In particular, the tech-heavy Nasdaq index and equity markets have a strong relationship with bitcoin. The Nasdaq has gained about 16% so far this year. This year, Bitcoin has outperformed the index, rising 49%.
A belief that the economic downturn may not be as severe as anticipated and that the Fed may slow the pace of interest rate increases has contributed to the bullish sentiment in risk assets.
“In general, the markets like the fact that inflation is coming down, interest rate hikes are slated to ease from here, but also that we may end up with either no big recession or something very mild,” Ayyar said.
(Adapted from CNBC.com)
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