Bitcoin hit an eight-month high on Thursday as investors returned to risky digital assets, despite renewed promises by regulators and lawmakers to rein in the cryptocurrency sector.
Bitcoin traded near $25,000, a 10 percent gain from the previous day, even as the stock market wobbled. Wall Street investors seem increasingly convinced that more interest rate hikes will be needed to rein in inflation, which has fueled volatility in markets over the past week.
But cryptocurrency investors seem to be operating in a different reality, reports the DealBook newsletter, with their optimism surging as signs of a regulatory crackdown grow after the collapse of cryptocurrency exchange FTX in November.
On Wednesday, the Securities and Exchange Commission proposed a new “custody” rule that, among other things, would limit the ability of asset managers to invest client money in crypto assets. The proposal follows a series of recent moves by regulators to give investors additional protections in a market known for wild price swings.
A similar issue was front and center on Capitol Hill Tuesday when the Senate Banking Committee held a hearing to discuss new safeguards for crypto investors, a potential first step toward legislation. “Now is the time to consider how to protect consumers from unregulated digital assets and ultimately who we want our financial system to serve,” said Sen. Sherrod Brown, D-Ohio and chair of the committee.
On Monday, the New York Department of Financial Services ordered Paxos, a crypto company, to stop creating BUSDone of the so-called stablecoins, due to “unresolved issues” over its relationship with the Binance cryptocurrency exchange, which bore the mark of the coin.
Last week, the SEC accused crypto exchange Kraken of securities violations, arguing that its practice of “staking,” in which users promise crypto assets to companies in exchange for large profits, was akin to selling an unregistered investment contract. .
And then there’s the shadow of the spectacular FTX implosion, which left investigators on a global manhunt to recover billions in lost assets. Amid attempts to recover funds to pay FTX clients, attention recently turned to $400 million sitting in an interest-bearing bank account.
So what’s behind the Bitcoin rally? Some people say that it is the so-called short squeeze, in which those who have bet against Bitcoin have to cover their positions by buying more. another explanation It’s tax loss picking, where investors sell at a loss at the end of the year to reduce their tax impact and then build up their holdings again when the calendar changes. A third potential factor: crypto investors appear to be selling their stakes in so-called altcoins and putting that money in the relatively more established Bitcoin.
