Bitcoin is up 50% so far in 2023, beating major stock and commodity indices. Industry insiders said the bank meltdowns have prompted investors to seek alternatives to the traditional banking system and there is also anticipation of a slowdown in interest rate rises, which is helping the bitcoins.
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Bitcoin climbed sharply on Wednesday as investors shrugged off initial fears surrounding U.S. regulators’ crackdown on industry giants and became willing to take risks.
The world’s largest cryptocurrency jumped 5% in the past 24 hours to $28,629, according to data from CoinGecko. Bitcoin rallied back to the $28,000 level after plunging below on Monday following the announcement of the The US Commodity Futures Trading Commission FTC lawsuit against Binance. It was last trading at $28,417 a coin.
Ether, the second-largest digital coin, rose nearly 4% to hit $1,806.
Bitcoin has risen steadily this year after a brutal 2022 that saw major crypto exchanges collapse and prices plummet. Investors were reassured by the idea of a US Federal Reserve course reversal upward movements in interest rateswhich put pressure on risky assets such as equities.
The reason for Wednesday’s jump wasn’t immediately clear. However, it comes amid a broad rise in US stocks. Bitcoin is known to follow stock market movements, with investors treating it more like a traditional risk asset.
Nasdaq futures rose 100 points, or 0.9%, Wednesday morning.
US regulators have recently stepped up their crackdown on crypto firms, with the CFTC suing Binance and its co-founder Changpeng Zhao for allegedly breaking trade rules by courting customers in the US without permission.
The Securities and Exchange Commission has also threatened to take legal action against Coinbase for alleged violations of securities rules.
“Overall, we seem quite bullish here with Bitcoin recovering $28,000 and looking to target $30,000 next,” Vijay Ayyar, head of international crypto exchange Luno, told CNBC on Wednesday.
“Generally, when price action starts absorbing negative news so quickly, it indicates that the market is bullish and trending higher. affected the market.”
Bitcoin had previously received a boost from woes of the global banking system. Swiss banking giant Credit Suisse was recently rescued by its counterpart UBS under a government-backed discount deal.
US tech-focused lender Silicon Valley Bank and crypto-focused banks Silvergate and Signature have also failed.
The Federal Reserve has sought to cushion the blow of 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.
Bitcoin proponents say it can serve as a store of value in times of economic distress and a form of money accessible to people without the need for a bank account.
However, it is incredibly volatile and has been known to rise or fall by 10% within hours.
“The market seems to be placing more weight on macro factors and that the Fed has already started a 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 background of bank failure over the past month and the rise of Bitcoin, this provides the perfect backdrop for Bitcoin to continue to remain bullish and move higher.”
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