What Biden's executive order means for crypto, and what's really driving the bitcoin price

Published Thu, Mar 10 202211:31 AM EST

President Joe Biden's executive order on crypto has brought a big sigh of relief to nearly everyone in the industry. Although it didn't say much about how to regulate cryptocurrencies, it still conveyed a tone of long-term support by the White House that surprised and relieved an industry largely unsurprised by the directive itself. The market reaction appeared to be just as positive, with bitcoin jumping nearly 10% at one point Wednesday, although it had erased most of those gains by Thursday morning. Investors say that while the jump was welcome, there isn't much in Biden's executive order to continue driving prices higher in the short term. Nevertheless, there's a lot to celebrate if you take the long view, as many crypto investors do. "The biggest takeaway is official recognition that the crypto ecosystem is big enough to be taken seriously at the highest level," Noelle Acheson, head of market insights at Genesis, told CNBC. "This executive order in recognizing it as such is giving it protection, they're not talking about banning it anymore and I think that ship has definitely sailed." No surprises, but all good things With the executive order, the industry is miles away from its precarious position last summer, when crypto was caught in the crosshairs of a Senate debate about the infrastructure bill that included what many deemed a poorly written provision detrimental to the cryptocurrency industry. "What we have here is the President of the United States saying that it is important that the U.S. maintain its leadership in digital assets," Kristin Smith, executive director of the Blockchain Association, told CNBC's "Crypto World" Wednesday . "This is a really big deal and quite an evolution from where the prior administration was, that was much more negative on these issues." The order called for several federal agencies to study over the next six months how best to regulate cryptocurrencies. For years regulators have been uncertain about who or which agency should regulate crypto because there isn't consensus about what exactly crypto is. That lack of clarity has also been cited often as the barrier to greater institutional adoption in the crypto market. "There's nothing in there that wasn't expected," Noelle Acheson, head of market insights at Genesis, said of the order. "It was taken as good news by the market because while it wasn't expecting any shocks, it was braced for them, because the sentiment is so fragile and bearish at the moment." Matt Hougan, chief investment officer at Bitwise Asset Management, told "Crypto World" the executive order is the signal of a new bull market phase in the crypto market. "The big question coming into the executive order was whether it was going to be balanced, whether it was going to talk about both the risks and the opportunities of crypto," he said. "It's pretty close to the outcome we were all hoping for. That's why you're seeing markets rally and I suspect that rally will continue for the rest of the year." What's really driving the price Crypto investors have been anticipating this order since well before the war in Ukraine began. Since then, crypto has shown the world it can be more than speculative assets , serving as a store of value and digital cash for Ukrainians and Russians these past few weeks. Bitcoin, at least for now, still trades like a risk asset. The nearly 10% jump in its price Wednesday coincided with a rally in U.S. equities, in which the S & P 500 and Nasdaq had their best days since June 2020 . On Thursday, bitcoin fell, along with stock futures. Michael Rinko, venture associate at AscendEx, said most traders are waiting to see how the Ukraine war plays out before entering in size, and that the executive order isn't enough to push bitcoin out of its current range. "My team views the ripple effects from the U.S. and E.U. sanctions on SWIFT and the freezing of Russian FX reserves as the more consequential even for crypto assets," he said. "I also don't believe the market was overly worried about this executive order to begin with, so short-term positioning likely won't be impacted by the positive news." Acheson said that in practice, the industry won't get the regulatory clarity the executive order is hinting at this year because the policies themselves will take months to formulate and could be pushed aside for midterm elections. She added that bitcoin's fundamental investment proposition was the main driver of bitcoin's price rally Wednesday, forcing investors of all types to consider more closely bitcoin as a store of value. Even as bitcoin behaves like a risk asset in the market, Genesis has been seeing steady accumulation, with 80% of supply being held in longer term addresses, she said. "Seeing citizens unable to access savings through no fault of their own and central banks seeing their own reserves seized – no matter how much we would support that pressure, it must be making a lot of other central banks sit up and think about where their reserves are held," she said. "What we're seeing right now is a relief bounce," she added. "But it's there's nothing in [the executive order] to further drive the market — unless you take it as meaning more institutions are going to be getting interested."

US President Joe Biden announces a ban on US imports of Russian oil and gas, March 8, 2022, from the Roosevelt Room of the White House in Washington, DC.

Jim Watson | AFP | Getty Images

President Joe Biden's executive order on crypto has brought a big sigh of relief to nearly everyone in the industry.