As the original cryptocurrency that acted as the basis for all that followed it, Bitcoin’s evolution is very important for the digital asset market. While investors have expected the situation to improve immediately following the difficult situation of 2022, it seems it won’t all be smooth sailing for cyber money. While traders are adjusting their strategies, and it becomes increasingly more popular to buy Bitcoin as a result of the newer, more enhanced security measures, the news from the cryptocurrency world offers a mixed perspective of the market’s development.
Nevertheless, most investors remain convinced that it is only a matter of time before BTC returns to its previous values. After all, it has suffered slumps in the past, only to come back stronger than ever. In order to develop a comprehensive plan of action, you need to take many different aspects into account, including the news, as well as the latest changes in the world of crypto.
State-owned bank trading
Traditionally, digital assets and conventional finance don’t go very well together. Cryptocurrencies are regarded as being significantly more volatile than other holding classes, which has led to them being considered outsiders of the financial world. Yet, over the past few years, markets have recorded a noteworthy shift in these views, with some financial institutions becoming more open to the prospect of dealing with cryptocurrencies, so long as they can do it on their own terms.
PostFinance, the financial services unit of Swiss Post and the fifth largest retail banking institution in Switzerland as of 2023, is just the latest to announce they’ve joined the ranks. Its parent company is well-known for its crypto-friendly stance, having issued digital tokens to be used as collectibles in the past.
The bank has joined forces with another local financial institution, Sygnum, to offer customers a wide range of digital money services, which are nevertheless subjected to regulations. Holders will have the option to buy, sell, store and trade the major crypto available on the market at the moment, namely Bitcoin and Ether.
This move comes in the context of growing demand from customers who want to see the traditional and digital finance worlds blend. Cryptocurrencies and tokens are steadily becoming more visible within the fiscal ecosystem, and consumers expect to see this change reflected in the procedures of the banks they work with.
There is one aspect of increased visibility that seems more like a downside than a positive thing for many traders, and that is the discourse surrounding regulations. When it first emerged on the market, crypto was a censorship-resistant asset, and this is what convinced many to give the newcomer a try and add it to their portfolios. With regulations looming in the background, it’s possible that many traders will feel like the initial purpose of digital currencies has been fundamentally betrayed and abandoned.
And yet, there’s a case to be made for introducing regulations to the market. Over 2022, several exchanges collapsed, leading to disastrous effects for crypto users. Since the beginning of 2023, banks that performed crypto transactions have also ceased all operations, events that came with further difficulties for the market and cryptocurrency pricing. The number of enforcement actions against companies dealing with crypto trades has seen a 50% increase compared to 2021, showing that further regulatory actions are certainly underway.
However, the biggest threat to the market comes from the possibility of some of the large exchanges being affected. If any of these companies would have to restrict their operations or shift procedures only to a few markets across the world, both individual and institutional investors will feel the aftershocks. A smaller market could also become more expensive, meaning that a potentially significant number of investors might discover that they can no longer keep up with the requirements.
The ratio between the daily trading volume and the derivatives market of Bitcoin has reached its lowest level over the past eleven months, signifying renewed speculative interest within the market, as well as a spike in activity within the ecosystem. This decline comes in the midst of a 70% rise in the BTC price so far since the beginning of 2023. Taken together, these figures indicate higher risk appetite within the market, as well as the possibility for elevated volatility.
When you put it into context, Bitcoin’s resistance above $28,500, observed over the last week of March, might, therefore, not have occurred as a result of the current risk associated with banking. With banks such as Silveragate having to abruptly cease all operations, the latest development appears to signify that the liquidity remained intact but has instead been distributed to products with higher leverage.
On April 4th 2023, another crypto platform announced that it would suspend its activity. Paxful, a marketplace launched in 2015, has informed users that they can begin retrieving their funds from the website and place them in self-custody if possible. Just as the banks that shut down earlier this year, regulations were named as one of the key considerations for the move, but the CEO has also cited staff departures as one of the key reasons.
The announcement came as quite a shock for customers since it was revealed just days after the peer-to-peer platform assured clients that it had plans to transform the Paxful Earn feature. This service would have permitted users to own a Bitcoin yield through the partnership with a separate exchange. However, this platform has filed for bankruptcy as well. A spokesperson for the company has reassured investors that they can withdraw the reserves safely as the integrated wallet remains fully operational.
While the situation within the crypto environment hasn’t been ideal, over the past months, most investors remained convinced of Bitcoin’s ability to improve and get out of its slump. However, nobody said that it would be an easy thing to do, and the next months remain crucial for the market’s evolution. An attentive investor knows that the best option is to remain vigilant and be prepared for any change as it arises.