Regulatory headwinds, uncertainty in the banking sector, and the forced exit of some bad players could be the reason bitcoin (BTC) is outperforming traditional safe-haven assets, said Mark Connors, head of research at 3IQ.
“We are still in the safe haven phase,” Connors told CoinDesk TV’s “First Mover” on Thursday. He said Bitcoin’s price action shows it is deviating from other digital assets like ether (ETH) and traditional financial assets like gold and 10-year US Treasuries.
Over the past month, Connors said, the largest crypto by market cap has surged in value by over 20%, compared to gold by about 8% and 10-year U.S. Treasuries, which are down 4.3%. Over the past two weeks, bitcoin price has surged about 15% to surpass $28,000 on Thursday.
According to Connors, traditional financial markets (TradFi) remain vulnerable to recent bank failures, with equities and corporate bonds having more downside potential. Over the past month, Silvergate Bank, Signature Bank and Silicon Valley Bank (SVB) have been closed or taken over by regulators.
“We are still in an uncertain phase,” said Connors.
At the same time, he said, the US is tightening the “regulatory screws” on the digital asset industry, with the Biden administration trying to control, but not kill, that industry, he said.
Connors also sees Bitcoin rallying, in part due to the forced 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 for someone to hoard some bitcoin and then sell it in May like Do Kwon did,” Connor said. The Securities and Exchange Commission alleges that Kwon, who was recently arrested in Montenegro, regularly transferred bitcoin from a wallet to a Swiss-based bank and converted the tokens into cash.
“It was also unusual to have a multi-billion dollar scam like FTX causing 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 US and facing a slew of charges. He will appear in court later this year.
“It’s gone,” Connors said of the two arrests. “That’s why bitcoin is up 63% this year.”
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