Bitcoin is reacting positively as the rest of the banking world collapses. Are these two factors related?
Yesterday, the American Federal Reserve raised interest rates once again, getting them to 5-5.25%. The 25 basis points raise was predictable, and the Fed also signaled this was probably the last hike before a long period of monetary stabilization. How did the crypto world react to the news?
After the disaster of 2022, Bitcoin is on the rise again. Since the start of the year, the most famous cryptocurrency increased 68% in value, almost reaching the $30.000 level.
As the conventional banks were collapsing left and right, Bitcoin gained traction as an unorthodox financial asset whose whole value proposition is decentralized banking. This morning, following the news of Pacwest Bank looking for buyers ahead of falling apart, Bitcoin rallied again.
This possibly delayed a fallback to the $25.000 level by Bitcoin, who seems to have reached a level of resistance at $27.000.
Nevertheless, it’s in the analysts opinion that Bitcoin is on a stabilization pattern at the moment. While it is likely to increase in value again, at least as long as the “real” banking system risks failing, it is currently on a downward descent.
But analysts are also confident it will break the $30.000 level, increasing in value as the rest of the economy falls apart.
US regulatory battle
Meanwhile, the internal political battle for crypto regulation silently rages within the United States.
The US is the last major economy to not have a comprehensive framework of regulations for cryptocurrencies, after the European Union adopted one earlier this year.
China and India have outright banned the mining and sales of cryptocurrencies, while other hubs like Hong Kong and Abu Dhabi created a set of welcoming rules.
In the US, the Biden administration and the SEC (Securities and Exchange Commission) clearly want to create such a framework. They point at the recent disasters of FTX and the extent of Sam Bankman-Fried’s fraudulent scheme.
Republicans, however, drag their feet. According to them, the entire purpose of cryptocurrencies was to have a financial asset without regulations. A completely self-regulating device free of government control.
But the SEC also points out that the very lack of regulation is making crypto players exiting the market for less risky environments. “Ultimately, if our approach does not change, this posture will continue to push entrepreneurs to establish their businesses outside of the U.S., drawing capital and economic growth away from the U.S. to the benefit of other countries,” a letter from the Subcommittee on Digital Assets reads.
It seems, therefore, that the US will indeed move towards a regulatory stance. The question is: will it be closer to the Chinese banning approach or Hong Kong’s welcoming one?
