Bitcoin Surges Past $24,000 As Crypto Market Recovers From Regulatory Scare
As crypto investors were concerned regulatory action would send Bitcoin (BTC) prices crashing down to bear market lows of last year, the largest cryptocurrency by market volume hit its highest level since August.
On Wednesday, Bitcoin jumped over 11.5% to $24,642, its biggest gain in a month. The increased price was the result of investors feeling less anxious about the U.S. economy’s future as the latest Consumer Price Index (CPI) numbers from the government showed inflation at 6.4%, a large drop from the 40-year high of 9.1% in June 2022. Bitcoin last traded at $24,500 six months ago.
Crypto prices have been fluctuating over the last few weeks as a result of stringent action taken by U.S. regulators towards a number of crypto firms.
The Securities and Exchanges Commission (SEC) warned crypto exchange Kraken over their staking-as-a-service program, which was allegedly not registered as a security with the agency before being offered to customers.
Payward Ventures Inc. and Payward Trading Ltd. – parent companies of Kraken – settled the securities laws violation lawsuit for $30 million, and without admitting or denying the charges promised not to provide its crypto staking product to customers in the United States.
Similarly, on February 3, the financial regulator sent a notice to stablecoin issuer Paxos Trust Co. related to its issuance of Binance’s BUSD token. SEC claimed the Binance-licensed stablecoin minted by Paxos was an unregistered security.
BUSD, which is the third-largest dollar-pegged stablecoin with a market cap of $16 billion, is used to trade cryptocurrencies on the Binance crypto exchange. The New York Department of Financial Services (NYDFS), which regulates financial assets, ordered Paxos to stop issuing the token on Monday.
Paxos Trust Co. then released a statement announcing that it will be terminating its 4-year-long partnership with Binance and will not mint BUSD after February 21, 2023.
The event led to Bitcoin dropping down to the $21,000 level. Binance BNB token dropped 6% below its $300 mark. News also surfaced that Circle, operator of the USDC stablecoin, was facing regulatory action, pushing the market to the verge of collapse.
However, crypto investors got a breath of fresh air after Paxos stated that it will assist BUSD holders in redeeming their funds until 2024. Investors quickly converted their BUSD holdings to Tether USD (USDT), the largest stablecoin in the market with a valuation of $69.78 billion, without any issues.
According To Crypto Analytics Firm
The markets have since recovered from the event. According to data from crypto analytics firm Coinglass, short-sellers were largely responsible for the unexpected crypto price reversal. On Wednesday, investors liquidated $65 million worth of BTC, of which about $60 million were in short positions.
Ethereum (ETH) also reaped the crypto markets’ benefits as the second largest cryptocurrency by trading volume saw its price rise by 9.3% to reach $1,695. Although the rise of Ether can be attributed to market conditions, there was also a separate reason for it.
On Wednesday, Ethereum-based NFT marketplace Blur, a major rival to digital collectables trading platform OpenSea, launched the BLUR token. After the cryptocurrency was airdropped to thousands of Blur users, gas fees on Ethereum pushed higher as collectors rushed to claim their share of BLUR.
The increase in transaction fees has further decreased the supply of Ether (ETH), which has been deflationary since the Merge upgrade in September. There is a running trend where when markets are on the rise, Ethereum gas fees increase and its supply decreases.
The biggest gainers of the day were Web3 entertainment platform Gala (GALA), smart contract protocol Avalanche (AVAX) and metaverse gaming platform Decentraland (MANA), which saw over 10% increase in their prices since yesterday.
