Bitcoin (BTC) is benefiting from instability in the financial system, lower inflation allowing the Federal Reserve to become less hawkish, and a regulatory overhang that has hit stablecoins, the provider said Thursday. Matrixport crypto services in a report.
“While these three trends persist, bitcoin prices may remain high and continue to recover,” Markus Thielen, head of research at Matrixport, wrote in the note.
“Investors have now woken up,” Thielen said, noting that the Fed’s interest rate policy has severely damaged some investment portfolios and threatened the financial stability of the economy.
Several flights to quality occur at the same time, according to Thielen’s note.
Traders and investors have shifted from higher beta — or more volatile — cryptocurrencies to bitcoin alongside a transition from stablecoins, which are less volatile. When Paxos Trust’s binance USD (BUSD) came under regulatory scrutiny, money moved from BUSD to BTC, and when Circle Internet Financial’s USD (USDC) coin lost its peg, the money flowed from the USDC. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, usually the US dollar.
In addition, the Fed’s rate hike policy has led to lower prices for Treasuries, lowering the value of banks’ portfolios. The collapse of Silvergate Bank, Silicon Valley Bank and Signature Bank (SBNY) shook financial markets this month.
The potential classification of some digital assets as securities has also become an overhang for many cryptocurrencies, the note adds.
“While there appears to be a clear path to regulation, there is a specific understanding that some may evade regulation,” the report said, noting that regulators and central banks have classified bitcoin as a commodity and not a commodity. as a security.
