Bitcoin has had a strong start to the year with the cryptocurrency experiencing a huge rally.
Jakub Porzycki | Nurfoto | fake images
Crypto markets rallied on Thursday, ignoring a tougher regulatory stance from the US government.
Bitcoin rose 11% to $24,655.94 around 3:36 a.m. ET while ether It was up more than 8% to $1,684.59, according to CoinDesk.
The value of the entire cryptocurrency market rose by more than $84.8 billion in the 24 hours prior to 3:39 a.m. ET.
There are โgrowing signs that the market bottomed out last November and has turned bullish,โ Vijay Ayyar, vice president of corporate and international development at crypto exchange Luno, told CNBC.
"We are gaining momentum here and any bad news is being ignored, typical signs that the market thinks the worst is over."
Crypto markets were on edge earlier this week following increased regulatory scrutiny from US authorities over digital currencies.
On Monday, the New York State Department of Financial Services told Paxos to stop minting new Binance USD or BUSD stablecoins. A stablecoin is a type of cryptocurrency that is tied to a real world asset and some are backed by assets such as bonds or cash. BUSD is pegged one to one to the US dollar.
paxos also confirmed that the Securities and Exchange Commission has notified the company that the agency may recommend an action alleging that BUSD is a security. The SEC has yet to formally file any charges against Paxos.
flow in bitcoin
The Bitcoin price on Thursday stood at its highest level since mid-August 2022. Last year, nearly $1.4 trillion was wiped from the crypto market. after the turbulence that saw bankruptcies, project and company failures. All of that was capped off by the collapse of the major FTX exchange.
Yuya Hasegawa, an analyst at Japanese crypto firm Bitcoin Bank, said there is a shift from so-called altcoins, or alternative currencies, to bitcoin in the wake of regulatory action.
"Wednesday's crypto rally was a bit of a surprise, but one thing stood out: it was led by bitcoin," Hasegawa told CNBC.
โThe current regulatory environment sure looks like a headwind for the crypto market, but it looks like some money is moving from altcoins to bitcoin, as bitcoin is the only cryptocurrency labeled a 'commodity' by the SEC Chairman. Consequently , the dominance of the bitcoin market is at the top."
Gary Gensler, Chairman of the SEC, repeated last year that the agency views bitcoin as a commodity rather than a security. Commodities are assets like gold, while shares are considered securities. They are regulated differently.
The Federal Reserve's interest rate hike designed to combat inflation also weighed on crypto markets. Bitcoin is also closely tied to the stock markets and in particular the tech-heavy Nasdaq Index. The Nasdaq is up 16% year to date. Bitcoin has outperformed the index and is up 49% this year.
Bullish sentiment in risk assets has been fueled by views that the economic downturn may not be as bad as expected and that the Federal Reserve may slow the pace of interest rate hikes.
"In general, markets like the fact that inflation is coming down, interest rate increases are scheduled to taper off from here, but also that we can end up with no major recession or something very mild," he said. Ayyar.
