Bitcoin hits all-time high, moving markets but not Washington
The price of a single bitcoin hit an all-time high Tuesday, topping $68,800 for the first time since November 2021 and extending a rally fueled by a cash infusion following the approval of exchange-traded funds that hold the cryptocurrency.
The Securities and Exchange Commission (SEC) approved the first U.S. spot exchange-traded funds in January, lending legitimacy to once-fringe digital assets and opening the door to billions in investment from financial institutions.
"The recent surge in Bitcoin’s value and the potential factors contributing to its increased price can be attributed to a combination of the upcoming scheduled Bitcoin halving and the increased institutional adoption through crypto ETPs and derivatives," said Rajeev Bamra, senior vice president of digital finance at Moody’s Investor Service.
"The impending halving, involving a substantial reduction in mining rewards from 6.25 to 3.125 BTC per block, aligns with increased demand, fueled in part by the growing popularity of spot crypto ETPs."
Bitcoin dominates the global crypto market, accounting for $1.3 trillion of the nearly $2.6 trillion in crypto in circulation around the world, according to the crypto data aggregator CoinGecko.
The turnaround in the crypto market from last year, when economists were also predicting a wider recession in the U.S., has been remarkable. The price of bitcoin has more than tripled from January 2023, when it was trading below $20,000.
A rising tide lifts all boats, and crypto is no exception. Other digital asset tokens, including Ethereum, have seen their prices soar, albeit at a slower rate than bitcoin, which has increased more than 26 percent since last Monday.
But Bamra warned investors should "exercise caution and acknowledge that the road ahead for the digital finance ecosystem, particularly the crypto markets, is expected to navigate through a period marked by volatility."
Crypto faces a challenging road in Washington, and the surge in bitcoin price isn't likely to move policymakers on crypto regulation anytime soon.
“This will not have any impact on the legislative agenda,” predicted Christopher Grieco, a former Justice Department and Trump White House official who is now general counsel and chief compliance officer at the Web3 company Rain Cards.
“Time for consideration before the election or in lame duck is rapidly coming to a close, and the Warren Gensler anti-crypto army don’t see BTC price as a positive but as a further call for draconian enforcement,” Grieco added, referring to Sen. Elizabeth Warren (D-Mass.) and Securities and Exchange Commission (SEC) Chair Gary Gensler, two staunch critics of the industry.
A number of cryptocurrency bills have been introduced this Congress. Crypto proponents, including Coinbase, are particularly fond of the Financial Innovation and Technology for the 21st Century Act, also known as FIT21, which establishes a sweeping regulatory framework for digital assets.
Crypto advocates have also been playing defense against Warren’s bipartisan Digital Asset Anti-Money Laundering Act (DAAMLA), which they say harms U.S. competitiveness without actually impacting illicit actors.
The Blockchain Association sent a letter to the House Financial Services Committee and Senate Banking Committee in February that included more than 80 signatures from former military and national security professionals — including Grieco — voicing their concerns with the anti-money-laundering legislation.
“Sen. Warren’s DAAMLA legislation, however, would inadvertently hinder law enforcement and national security efforts by driving the majority of the digital asset industry overseas. This shift could also lead to increased liquidity in unregulated offshore exchanges and a loss of valuable expertise and visibility for the U.S. in the blockchain realm. Further, this legislation, if implemented, will have no meaningful effect on the foreign illicit actors it targets,” the letter says.
The agency sued crypto exchange giants Coinbase and Binance last summer. The two lawsuits differ in their facts, but both cases alleged the exchanges failed to register with the SEC despite selling cryptocurrencies the agency said could be securities.
“The overbearing and uncertain enforcement should be enough impetus for a legislative solution that provides clarity and protections to crypto participants, but it seems increasingly unlikely that Congress will pass anything this year,” Grieco said.