Crypto Market Rebounds Despite US Inflation Release

Bitcoin rebounded above US$22K after better inflation readings, helped by Silvergate shares soaring on Citadel Securities.
Crypto Market Rebounds Despite US Inflation Release

15th February 2023 - Despite the January US inflation coming above market expectation compiled by Reuters, risk assets, including crypto, reacted well to some items of the inflation data release. Rent and good prices came in below expectations, which the Fed monitors closely. In our view, the surprising market reaction to the full US inflation data may indicate that investors are paying less attention to the macro. The market could be already pricing in the continuation of interest rates hikes deceleration, and starting to monitor the impact of a harsher regulation in the US.

Silvergate shares soared yesterday, following the announcement of multiple investments in the distressed bank, whose solvency was one of the main risks in crypto one month ago. Susquehanna Advisors Group reported a 7.5% stake in the bank after Citadel Securities said it owned 5.5%. We see this news as very positive because it mitigates a considerable amount of risk that was looming over the crypto market for a while.

Amidst the regulatory movement against the crypto industry, the Blockchain Association Chief Policy Officer Jake Chervinsky said that the US Congress will ultimately set the laws in the country to govern the cryptocurrency industry and not the SEC. He argues that the SEC and other regulatory agencies are bound by this legal reality. Therefore, the most important regulatory developments will come from the Congress. Similarly, the Brazilian Congress approved last year the cryptocurrencies law, which will be regulated by the Central Bank and the Brazilian SEC. The Finance Ministry would be aligning with both regulatory authorities to outline the regulation to be released in the near future. We believe that the crypto industry regulation will only increase and market participants will have to adapt accordingly.

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