Crypto Demand Rises Despite Regulatory Concerns

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Cryptocurrencies have seen its value plunge this year, with more than $2 trillion being wiped off since its peak in Nov. 2021. The market has been under pressure due to the collapse of major exchange FTX.

Jonathan Raa | Nurphoto | Getty Images

Cryptocurrency prices surged on Thursday as investors took a positive view of the Federal Reserve’s rate-hiking campaign and the ongoing troubles in the banking system.

The price of bitcoin increased more than 4% to $28,290.71, according to Coin Metrics. Ether also added almost 5% to trade at $1,822.50.

Crypto rose alongside other risk assets. All three of the major stock indexes were higher on the day after their Fed-induced sell-off in the prior session.

Investors were assessing the latest update from the central bank’s Wednesday meeting and “balancing uncertainty with opportunity,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs.

On Wednesday, the Fed raised rates another 25 basis points, as expected, and signalled that the end of its inflation-battling increases could be near. Nonetheless, stocks and crypto sold off by the end of the day.

“The Fed did what the market wanted and indicated that future rate hikes may not be necessary and acknowledged the deflationary effect that the recent bank collapses would have on inflation,” Jablonski said. “A Fed that is looking to pause should be beneficial for risk and growth assets like tech stocks and crypto. … In short, uncertainty remains in monetary policy, and the impact of rates on the economy in terms of whether or not we see a recession.”

The market also seemed to be ignoring bad news about the “troubling regulatory environment” in crypto. Late Wednesday, Coinbase received a Wells notice from the Securities and Exchange Commission warning the company that it may have violated securities laws. On Thursday, the SEC issued an investor alert on crypto assets.

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