Bitcoin has had a strong start to the year with the cryptocurrency seeing a big rally.
Jakub Porzycki Nurphoto Getty Images
Crypto markets rallied on Thursday, easing the tougher regulatory stance from the US government.
Bitcoin rose 11% to $24,655.94 around 3:36 am ET when ether up more than 8% at $1,684.59, according to CoinDesk.
The value of the entire cryptocurrency market increased by more than $84.8 billion in the 24 hours before 3:39 am ET.
There are “increasing signs that the market bottomed out last November and has become bullish,” Vijay Ayyar, vice president of corporate and international development at crypto exchange Luno, told CNBC.
“We are gaining in momentum here and any bad news is being shrugged off, a typical sign that the market believes that the worst is over.”
Crypto markets were on edge earlier this week following increased regulatory scrutiny from US authorities on digital currencies.
On Monday, the New York State Department of Financial Services told Paxos to stop printing new Binance USD, or BUSD, stablecoins. Stablecoins are a type of cryptocurrency that is embedded in real-world assets and some are backed by assets such as bonds or cash. BUSD is pegged one-to-one to the US dollar.
Paxos also confirmed that the Securities and Exchange Commission has notified the company that the agency may recommend actions declaring BUSD as a security. The SEC has not formally filed charges against Paxos.
Flow to bitcoin
The price of Bitcoin is at the highest level since mid-August 2022. Last year, almost $ 1.4 trillion was removed from the crypto market after the turmoil that led to bankruptcies, failures of projects and companies. All that is topped by the collapse of the main exchange FTX.
Yuya Hasegawa, an analyst at Japanese crypto firm Bitcoin Bank, said there was a shift from altcoins, or alternative coins, to bitcoin after the regulatory action.
“Wednesday’s crypto rally was a bit of a surprise, but there was one thing: it was led by bitcoin,” Hasegawa told CNBC.
“The current regulatory environment certainly seems like a headwind for the crypto market, but it seems that some money is moving from altcoins to bitcoin, since bitcoin is the only cryptocurrency labeled a ‘commodity’ by the SEC chair. As a result, bitcoin’s market dominance is on the rise.”
Gary Gensler, chairman of the SEC, stated last year that the agency views bitcoin as a commodity rather than a security. Commodities are assets like gold, but stocks are considered securities. They are organized differently.
Interest rate hikes from the Federal Reserve designed to combat inflation also weighed on the crypto market. Bitcoin is also closely related to the equity market and especially the tech-heavy Nasdaq index. The Nasdaq is up about 16% annually. Bitcoin has outperformed the index and is up 49% this year.
Bullish sentiment in risk assets has been helped by the perception that the economic slowdown may not be as expected, and the Fed may reduce the rate of interest rate hikes.
“In general, the market likes the fact that if inflation goes down, interest rate hikes are scheduled to go down from here, but also there may not be a major recession or a very mild one,” Ayyar said.