Sudden rise in price of Bitcoin shows investors are embracing onset of increased crypto regulation
Bitcoin hit nearly $25,000 early Thursday morning as investors appeared to dismiss concerns about enhanced crypto regulation being introduced.
The world’s largest cryptocurrency by market capitalisation jumped around 3%, trading at $24,720. August 2022 was the last time BTC was as close to the key threshold. Other cryptos such as Ether and Cardano also made gains.
The climbs extend a recovery in prices from last year’s so-called crypto winter, including an almost 50% year-to-date gain for Bitcoin.
Many will argue that this is not a surprise as global stocks are becoming steadily more bullish. Inflation is going to be an issue for markets for a while yet, but there are clear signs that we’re closer to the ‘home run’.
Indeed, Federal Reserve Chair Jerome Powell’s comments last week about the “disinflationary process” having begun is dominating investors’ mindsets as they seek to create and build wealth after a difficult 2022.
But what is surprising some analysts is why the price of Bitcoin is going up now.
Why are the major cryptocurrencies registering major gains within the same 24 hours that US financial regulator, the Securities and Exchange Commission (SEC) – arguably the world’s most powerful and influential – voted 4-to-1 to pursue sweeping amendments to US crypto regulations?
Yesterday, SEC chair Gary Gensler proposed changing federal custody requirements to include assets like crypto, which would mean that crypto exchanges would need to obtain additional regulatory approval.
The changes would require they have to introduce and maintain certain federal or state registrations. It comes as regulators are both increasing scrutiny on crypto exchanges and making it harder to secure regulatory approval for crypto products and services.
The recent regulatory “crackdowns” have, perhaps unexpectedly, not been welcomed wholeheartedly by many within the industry. For instance, in an interview on CNBC’s Squawk Box, Blockchain Association CEO Kristin Smith said they felt “like a crypto carpet bombing”.
She noted: “What we have going on is we have different regulatory agencies that are coming in taking action, often enforcement actions…and trying to sort of ‘rein in the industry.”
Regulatory scrutiny has certainly tightened in the wake of last year’s FTX collapse and the bankruptcies of Celsius and Voyager, amongst other high-profile issues.
And, judging by the price trajectory of Bitcoin and other cryptos since the beginning of the year, this is being well-received by investors – both individual and institutional.
The 50% jump in the BTC price is evidence that investors feel more assured, protected and confident by growing regulation of the crypto sector.
The fact that digital currencies are steadily being brought into the regulatory tent in the world’s largest economy and one of the most highly-regulated markets shows that crypto is now mainstream. It has come of age.
Investors know this. Even if some within the industry itself don’t yet.