As of May 31, 2023, the price of Bitcoin is $27,686 and Ethereum is at $1,901. These prices reflect a rise in the value of these cryptocurrencies since the beginning of the year, with Bitcoin up 65% and Ethereum up 55% year-to-date.
In the recent weeks, there has been increased volatility in the market. Between mid-March to mid-April, Bitcoin traded in a narrow price range between around $26,000 and $28,600.
However, Bitcoin broke out to the upside on April 10, ultimately trading as high as $31,005, and Ethereum prices also rallied in April, jumping more than 10% to above $2,000 for the first time in eight months following its Shanghai upgrade.
This bullish trend was driven in part by a sharp sell-off in shares of First Republic Bank, which reported a significant drop in customer deposits in the first quarter. The ongoing U.S. banking crisis and the potential for a looming recession have driven some investors to seek shelter in cryptocurrencies.
Regulatory impact on crypto market
The cryptocurrency market has also been impacted by regulatory developments. The U.S. Securities and Exchange Commission (SEC) has proposed amendments to include crypto trading platforms under existing securities regulations, indicating that crypto companies will not receive a set of tailored regulations.
This has been met with resistance from crypto exchange Coinbase and members of the House Financial Services Committee, who accuse the SEC of driving cryptocurrency platforms overseas. Additionally, new rules have been proposed for “payment” stablecoins that could limit risk and potentially attract more institutional investment.
Evolving crypto landscape and liquidity
According to a report by K33 Research, regulatory changes in Asia and the re-election of Recep Erdogan as president of Turkey have contributed to the changing market dynamics.
K33 Research suggests that the surge in Bitcoin’s price has been partially driven by over-leveraged shorts, leading to a decrease in open interest. Simultaneously, progress in U.S. debt ceiling negotiations has fueled a rally in both the crypto and U.S. equities markets.
The report highlights the evolving structure of the crypto market, with stablecoins and Ether gaining prominence while Bitcoin’s dominance remains relatively lower. This shift in market dynamics, coupled with the potential lack of sufficient de-risk rotation, has drawn parallels to the previous bear market.
However, the report also notes that the cure for these market uncertainties lies in increased liquidity, which currently appears to be lacking. The absence of liquidity further adds to the volatility and unpredictability of the crypto market.
