(Bloomberg) — Bitcoin jumped above $42,000 amid a sharp rally in digital tokens, spurred by optimism about an impending U.S. overhaul of crypto oversight that Treasury Secretary Janet Yellen called “historic.”
The largest cryptocurrency rose as much as 10% to $42,427 on Wednesday morning in New York, its highest level since March 2. Ether climbed 8% while so-called privacy coins like Monero posted large gains. The crypto advance came as a broad risk-on rally embraced European stocks.
President Joe Biden will sign an executive order later on Wednesday which mandates government agencies to take a closer look at issues from developing a potential digital U.S. dollar to combating illicit finance.
The goal is to take advantage of the potential benefits of digital assets while also addressing the risks, the White House said in a fact sheet. Agencies will have from 60 to 180 days to complete their reports, a senior administration official said late Tuesday, after which the administration plans to move quickly to carry out the recommendations.
Read more: Biden Pushes for More Coordinated Approach to Crypto Oversight
Yellen praised the order in a statement on the Treasury’s website on Tuesday that was later removed, saying it strikes the right balance between fostering innovation and addressing potential risks. That boosted sentiment in an industry that has long called for greater regulatory direction.
“For years, the crypto market has been hindered by a lack of regulatory clarity in the U.S.,” said Hayden Hughes, chief executive officer of trading social-media platform Alpha Impact, in a message Wednesday. “If clear guidelines are passed, this could be a watershed moment for the industry.”
Yellen said the department’s efforts under the executive order would complement work that’s already been done, including the report the President’s Working Group on Financial Markets put out last year on stablecoins.
In the since-removed statement dated March 9, Yellen said the approach outlined in the order “will support responsible innovation that could result in substantial benefits for the nation, consumers, and businesses.”
Even after Wednesday’s rally, Bitcoin remains within the range of $33,000 to $48,000 where it’s traded most of this year. After diverging from stocks early last week, cryptocurrencies gave up most of those gains as the war in Ukraine escalated, pouring cold water on the argument that they’re a safe haven in times of geopolitical turmoil.
“The order seems relatively benign, hence giving the market some clarity,” said Marcus Sotiriou, analyst at digital asset broker GlobalBlock, in a note on Wednesday. “As many investors had prepared for the downside risks of this event by waiting on the sidelines, we are seeing many buy Bitcoin back in what appears to be a spot-driven rally.”
Privacy Upside
Privacy coins — so called for the higher degree of anonymity they afford users — were some of the biggest winners over the past 24 hours, with Monero jumping 21% and Zcash up 17%, based on CoinGecko data. The gains were driven by speculation that they may get payment traffic displaced by the sanctions on Russia.
“The recent surge in privacy coins is mostly driven by traders speculating on the possibility that we will see capital flight” into them, said Ben Caselin, head of research and strategy at crypto exchange AAX, in a message Wednesday.
While privacy coins allow for a higher degree of anonymity, the networks they live on are less decentralized and less secure than Bitcoin, and limited in market cap, he said. “Rather than a new trend, current uptake is likely to be limited, with more volatility ahead.”
(Updates to include information about the order, adds comment in 10th paragraph)
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
