The price of Bitcoin has pushed upwards again, with crypto investors largely unperturbed by the maelstrom of crackdowns, lawsuits and arrests that have hit the crypto industry over the last 48 hours.
Over the last two days, the SEC charged billionaire Justin Sun with fraud, handed out a Wells Notice to Coinbase — which means that the crypto exchange will soon face legal action — and pinned Terraform Labs cofounder Do Kwon with even more fraud charges.
This kind of all-out hostility towards major actors in the crypto space would typically send the price of mainstay digital assets like Bitcoin (BTC) and Ethereum (ETH) spiralling, but investors — for the most part — seemed not to care.
It’s worth noting that the price of Bitcoin briefly dipped around 6% yesterday, but a renewed risk appetite among crypto investors saw the price whipsaw 6%, taking it back to US$28,414 at the time of writing.
Why is Bitcoin going up today?
The crypto and Bitcoin rebound follows a broader recovery in the stock market, where the tech-focused Nasdaq index is leading the charge. Crypto and tech stocks have historically been highly correlated with another, meaning that they quite often move up and down in sync.
Even though this correlation seemed to be decoupling at the beginning of the year — with Bitcoin outperforming traditional markets in drastic fashion — it’s begun falling in line now that both crypto and tech have started rallying in the aftermath of the banking crisis.
Carlos Gomez, the Chief Investment Officer at Belobaba Crypto Asset Fund told The Chainsaw why Bitcoin’s price has been performing so well over the last few days and why investors seem unphased by the regulatory action against the sector.
“Until not long ago, we used to think that Bitcoin was probably too risky for most financial institutions. Maybe the volatility and the liquidity — or the lack of liquidity — was a serious threat to its solvency,” said Gomez.
“However, the recent events involving SVB, Silvershare and Signature demonstrated that the structural problems faced by the Banks nowadays have nothing to do with Bitcoin or crypto,” Gomez said. “It’s the constrained liquidity of US Dollars caused by months of Quantitative Tightening that have accelerated a micro crisis.”
Gomez explained that while proponents of Bitcoin have long been talking of its use as a hedge against inflation and a store of value against the US Dollar, the unfolding banking crisis is finally beginning to see this argument come to fruition.
“This situation is generating a lack of trust in the Bank’s Balance sheet in absence of more clear or strong messages of comfort by the Fed Reserve and as a result of that, investors are starting to see Bitcoin finally as a store of value.”
Carlos Gomez, Belobaba CIO
Bitcoin price: Is a major Bitcoin crash possible?
Gomez remains unconvinced that a major crash could be looming for the crypto industry, especially after the US Federal Reserve only chose to hike interest rates by 0.25% at yesterday’s FOMC meeting.
“A short term crash could only be caused by a major Black Swan event or if Chairman Powell chose to raise interest rates by more than 50 basic points at the FOMC.”
All of this leads Gomez to conclude that a major short-term crash, “is unlikely under the current circumstances,” and that he can only see “a moderate bullish sentiment in investors thanks to fresh injections of liquidity in the economy.
