Cryptocurrencies continue to rebound as some say crypto is “through the bear market”

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Cryptocurrencies are rising in 2023 despite a banking crisis, rising interest rates, and a host of new legal and regulatory headaches for the fledgling industry.

Bitcoin, the largest and most well-known digital currency, was up 69% in the three months ending March 31, while second-largest Ether was up 51%. Bitcoin (BTC) is currently hovering around $28,000 while Ether (ETH) climbed above $1,900 per coin on Wednesday, its highest level since September last year. Both are relatively stable over the past 24 hours.

Even Dogecoin (DOGE), a cryptocurrency that started out as a joke, rose 30% on Monday after Elon Musk swapped Twitter’s bird icon with Dogecoin’s Shiba Inu logo. Doge lost some of those gains on Thursday when the Twitter logo was replaced.

SkyBridge Capital founder and managing partner Anthony Scaramucci told Yahoo Finance on Thursday, “I guess we’ve been through the bear market” in cryptocurrencies. “If something happens to Binance,” he said, referring to a crypto exchange facing new legal pressure from regulators, “I think it will be a short-term success.”

Skybridge struggled last year with some customers asking to withdraw their money. He also sold a 30% stake in crypto exchange FTX before the exchange collapsed. Skybridge’s total assets under management fell to $1.8 billion at the end of 2022, down 50% from the previous year and 80% from the 2015 high of $9.2 billion of dollars.

But Scaramucci remains confident in his company’s crypto investments. “Any time you’ve held bitcoin in a rolling four-year interval, so you pick the day, hold it for four years, you’ve outperformed every other asset class,” Scaramucci said.

Anthony Scaramucci attends the 2022 Forbes Iconoclase at the New York Historical Society on November 03, 2022 in New York City. (Photo by Taylor Hill/Getty Images)

The rapid rise of digital currencies is one of the big surprises of the year in markets after a crash in 2022 that cost investors billions, as rising interest rates and inflation reduced value and price. attraction of risky assets.

The story continues

Several crypto players have filed for bankruptcy, including FTX in November. Former FTX CEO Sam Bankman-Fried now faces criminal charges for stealing billions in funds from FTX clients and misleading investors.

“It’s a rebound from the really poor performance we saw in 2022,” Todd Rosenbluth, head of research at VettaFi, told Yahoo Finance on Tuesday.

Ironically, what gave the market a boost this year was a banking crisis in March that brought down three lenders, including two that specifically served cryptocurrency customers.

Some investors have chosen to seek out cryptocurrencies as a refuge from the perceived instability of the banking sector. Others anticipated that the Fed might have to cut interest rates in response to the crisis, triggering more flows into alternative risk assets.

Since March 10, the day regulators seized Silicon Valley Bank in the second-largest bank failure in U.S. history, bitcoin is up more than 33% and ether more than 26% . The total value of all crypto assets increased by more than 22% during this period, Friday at 8:30 a.m. ET.

Regulation pressure ramps

This year’s crypto comeback is unfolding even as regulators in Washington step up their efforts to rein in this market.

The Securities and Exchange Commission has issued 11 enforcement actions since the beginning of January against crypto companies and individuals, while serving official letters on Paxos, DeFi Exchange Sushi and Coinbase Global (COIN) warning that the agency plans to take legal action. Coinbase is the largest American crypto exchange.

Coinbase shares have rebounded 73% since the start of the year, but are still two-thirds lower than their value a year ago.

Another regulator, the Commodities and Futures Trading Commission, has also sued crypto exchange Binance and its CEO Changpeng Zhao for allegedly selling digital asset-backed derivatives to US clients despite not being registered for the trade. TO DO.

Zhao Changpeng, founder and CEO of Binance, speaks during an event in Athens, Greece November 25, 2022. REUTERS/Costas Baltas

“This industry is not in a good position of trust right now with the public, with investors, with customers,” CFTC Commissioner Christy Goldsmith Romero said Wednesday at the Links NYC conference hosted by the crypto company Chainalysis.

Goldsmith Romero noted that crypto firms are still grappling with “learned” issues from the collapse of FTX last November, while regulators try to move quickly to understand the technology. The CFTC has been working on enforcement cases with other agencies, “and I think you’ll probably see more of that,” she added.

Liquidity is drying up

Another concern for some investors is that the liquidity of major cryptocurrencies has fallen to record lows. Data from research firm Kaiko shows that the ease of exchange between bitcoin and ether cash has fallen a total of 50% and 41% respectively since FTX filed for bankruptcy on November 11.

“It tires me of any recent rally although bitcoin is pretty close to $30,000,” Christopher Newhouse, a crypto derivatives trader at GSR, told Yahoo Finance.

the dock

Newhouse said he feared everyday traders would enter the market, citing recent large bitcoin and ether allocations made by major trading players Binance and MicroStrategy (MSTR). MicroStrategy disclosed in an SEC filing on Wednesday that it had purchased just over a thousand bitcoins, bringing its total BTC reserve to around $3.9 billion, based on current market prices.

“It makes me wonder if new entrants are really entering the market and, from a price point of view, if this rally is sustainable or if organic buying has died out,” Newhouse added.

But since early February, bitcoin’s 50-day average has moved above the 200-day moving average, a so-called “golden cross” pattern that suggests users plot that market sentiment has shifted from bearish to bullish.

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