Regulatory headwinds, uncertainty in the banking sector, and the forced exit of some bad actors may be why bitcoin (BTC) is outperforming traditional safe-haven assets, said Mark Connors, 3IQ head of research.
“We’re still in the safe haven period,” Connors told CoinDesk TV’s “First Mover” on Thursday. He said bitcoin’s price performance shows it to be diverging from other digital assets such as ether (ETH) and traditional financial assets such as gold and U.S. 10-year Treasurys.
In the past month, Connors noted, the value of the largest crypto by market cap has risen by over 20% compared to gold, up by about 8%, and U.S. 10-year Treasury bonds, which have decreased by 4.3%. In the last two weeks, the bitcoin price rose by about 15%, to above $28,000 on Thursday.
According to Connors, recent bank failures are still putting traditional finance (TradFi) markets at risk, with equities and corporate debt having more downside. In the past month, Silvergate Bank, Signature Bank and Silicon Valley Bank (SVB) have closed or been taken over by regulators.
“We’re still in an uncertain period,” Connors said.
At the same time, he said, the U.S. is turning “regulatory screws tighter” on the digital asset industry, with the Biden administration trying to exert control, but not kill, that industry, he said.
Connors also sees bitcoin rallying, in part, because of the enforced departure of some of the industry’s biggest players – Terraform Labs founder Do Kwon and Sam Bankman-Fried, the former CEO of bankrupt crypto exchange FTX.
“It was very unusual to have someone hoard some bitcoin and then sell it in May like Do Kwon did,” Connor said. The Securities and Exchange Commission alleges Kwon, recently arrested in Montenegro, had been periodically transferring bitcoin from a wallet to a Switzerland-based bank and converting the tokens to cash.
“It was also unusual to have a multibillion-dollar fraud like FTX that causes more FUD [fear, uncertainty and doubt],” he said of the now-bankrupt exchange. Former CEO Sam Bankman-Fried was arrested in the Bahamas, extradited to the U.S. and faces a number of charges. He goes on trial later this year.
“That’s gone,” said Connors about the two arrests. “That’s why bitcoin’s up 63% this year.”
