Bitcoin (BTC) climbs to $28,000 as traders shrug off regulatory crackdown
Bitcoin is up 50% so far in 2023, beating major commodities and stock indexes. Industry insiders said the bank collapses have sent investors looking for alternatives to the traditional banking system, and there is also expectation of a slowdown in interest rate hikes, helping bitcoin.
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Bitcoin climbed sharply on Wednesday as investors shrugged off initial fears about US regulators cracking down on industry giants and became willing to take some risk.
The world’s largest cryptocurrency rose 5% in the past 24 hours to as high as $28,474, according to CoinGecko data. Bitcoin has reclaimed the $28,000 level after dipping below it on Monday following news of the US Commodity Futures Trading Commission FTC’s lawsuit against Binance.
Ether, the second-largest digital coin, rose nearly 6% to $1,816.10.
Bitcoin has risen steadily this year after a brutal 2022 that saw the collapse of major crypto exchanges and a sharp price decline. Investors have taken some comfort from the thought of a reversal in the US central bank’s interest rate hikes, which is putting pressure on risk assets such as stocks.
The reason for the jump on Wednesday was not immediately clear. However, it comes amid a broad rally in US stocks. Bitcoin has been known to follow movements in the stock markets, with investors treating it as more of a traditional risk asset.
Nasdaq futures rose 100 points, or 0.9%, on Wednesday morning.
US regulators have been cracking down on crypto firms recently, with the CFTC suing Binance and its co-founder Changpeng Zhao for allegedly violating trading rules by courting clients in the US without authorization.
The Securities and Exchange Commission has also threatened to take legal action against Coinbase for alleged violations of securities rules.
“Broadly speaking, we’re looking pretty bullish here with Bitcoin regaining $28K and looking to target $30K next,” Vijay Ayyar, head of international at crypto exchange Luno, told CNBC via email on Wednesday.
“Generally, when price action starts absorbing negative news so quickly, it indicates that the market is bullish and trending up. Although the CFTC case against Binance is quite important, it doesn’t seem to have affected the market that much.”
Bitcoin had previously received a boost from problems in the global banking system. Swiss banking giant Credit Suisse was recently rescued by its peer UBS in a state-backed deal at reduced rates.
US tech-focused lender Silicon Valley Bank and crypto-oriented banks Silvergate and Signature have also failed.
The Federal Reserve has attempted to cushion the blow from the banking crisis with a lending program known as the Bank Term Funding Program, or BTFP, which aims to help banks meet their obligations to depositors.
Proponents of bitcoin say it can serve as a store of value in times of economic distress and a form of money people can access without the need for a bank account.
However, it is incredibly volatile and has been known to swing up or down 10% in a matter of hours.
“The market seems to be placing more weight on macroeconomic factors and that the Fed has already begun some form of QE, now known as BTFP, but also that the interest rate pivot could happen sooner rather than later,” Ayyar told CNBC.
“Against the backdrop of bank failures over the last month or so and Bitcoin’s rise, this provides the perfect context for Bitcoin to continue to be bullish and move higher.”
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