Bitcoin (BTC) Benefits from Financial System Instability, Falling Inflation Allowing Fed to Be Less Hawkish, and Regulatory Overhang Hitting Stablecoins Matrixport, a crypto asset (virtual currency) services company, said in a report on March 16.
“If these three trends continue, Bitcoin price could stay high and continue to rise,” wrote Markus Thielen, head of research and strategy.
“Investors have just woken up,” Matrixport said, noting that the Fed’s interest rate policy has severely damaged some investment portfolios and threatened the economy’s financial stability.
A “flight to quality” is taking place at the same time, says the report.
Along with the shift from high beta, or high volatility crypto assets to Bitcoin, there is also a shift from low volatility stablecoins. When Paxos’ Binance USD (BUSD) underwent regulatory scrutiny, funds moved from BUSD to BTC, and when Circle’s USD Coin (USDC) lost its peg, the flow from USDC there were. A stablecoin is a type of crypto asset whose value is pegged to another asset such as the US dollar or gold.
Also, the Fed’s interest rate hike policy has caused the price of government bonds to fall, reducing the value of bank portfolios. Moreover, the failures of Silvergate Bank, Silicon Valley Bank (SVB) and Signature Bank (SBNY) over the past week have rocked financial markets.
A “flight to quality” is when investors sell what they perceive as risky investments and buy safer assets.
The possibility of being classified as a security has also become a burden for many crypto assets, the report adds.
“While there appears to be a clear path to regulation, there is an understanding that some things can be circumvented,” the report said, citing regulators and central banks to classify bitcoin as a commodity rather than a security. It points out that
｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
｜Original: Bitcoin Is Benefiting From Crypto’s Flight to Quality: Matrixport