Bitcoin wins as crypto unbowed by latest regulatory crackdown

by Arthur · March 23, 2023

(Bloomberg) — Bitcoin resumed its retreat toward $30,000 and smaller digital tokens rallied as a broad renewal in risk appetite led investors to play down an extended regulatory backlash.

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The oldest cryptocurrency gained as much as 5.2% to trade around $28,812. Bitcoin traded just below $29,000 on Wednesday until the Federal Reserve raised interest rates as expected. The token, which has not traded at $30,000 since June, has jumped around 70% this year.

“It’s basically an asset that trades on sentiment,” Que Nguyen, Research Affiliate’s CIO for Equity Strategies, said in an interview at Bloomberg headquarters in New York. “One of the things that I find curious about crypto is that no one is really doing anything about it. If there’s anything to do with it that affects the real economy, then it’s going to be really big. But if it’s not, then to be limited to this circle of enthusiasts.”

Coinbase Global Inc. disclosed on Wednesday that it received a notice from the Securities and Exchange Commission formally declaring the regulator’s plans to take enforcement action against the largest crypto exchange in the United States. In a separate action on Wednesday, the SEC sued crypto mogul Justin Sun for allegedly violating securities rules. Sun said the complaint lacks merit.

Among so-called altcoins, Cardano jumped 5.3%, Avalanche rose 6.3% and Litecoin rose 7.7%. TRX, the token linked to the Tron network launched by Sun, rose around 7.8% after falling 12% on Wednesday.

Bitcoin “basically follows the broader markets, digests the Fed, and basically mitigates some of the damage that was done yesterday,” said Ilan Solot, co-head of digital assets at Marex.

“The crypto market appears to have had a similar view to the bond market coming into the Fed meeting that there was an overwhelming likelihood of a 25 bps hike and a slim likelihood of a standing ovation,” said Stephane Ouellette, managing director of institutional crypto brokerage firm FRNT Financial.

The rise in crypto follows a general improvement in the stock market, where the technology-heavy Nasdaq 100 leads the rise. This index – with which crypto tokens have moved in a similar way in the past – is up 17% so far this year, and many analysts still point to the two often trading together. Although the correlation between the two had weakened at the start of the year, it has strengthened as both increase in the wake of the turmoil in the banking sector.

Read more: Record demand for derivatives drives Bitcoin’s resurgence

“The draw is notable but not excessive,” said Chris Newhouse, a derivatives trader at crypto investment firm GSR. “A move below $25,000 or above $30,000 would likely have led to increased volume in the derivatives markets and more speculative bets starting to take place.”

–With assistance from Carly Wanna and Vildana Hajric.

(Updates with Nguyen commentary; updating prices throughout.)