Investors are still feeling bearish when it comes to Bitcoin. But why? And for how long will it last?

The narrative that has taken shape over the last two years is that as a “risk-on” asset, Bitcoin follows U.S. equities—which have plummeted in value since the Federal Reserve started aggressively hiking interest rates last year. 

And that’s still true. But there are other factors at play: Investors are in a state of limbo as a tough regulatory crackdown and the collapse of major crypto-friendly bank Silvergate has them either selling or sitting still, according to the experts who spoke with Decrypt.


Regulators have been going after crypto hard since 2023 started: SEC Chairman Gary Gensler wants to crack down on the industry as a whole and all the digital assets he considers unregistered securities—which is, as we’ve learned, basically all of them, except Bitcoin.

In January, the regulator charged crypto broker Genesis and the Winklevoss-founded exchange Gemini for offering unregistered securities. Last month, the SEC fined crypto exchange Kraken $30 million for violating securities laws.

The world’s biggest crypto exchange Binance has also been on shaky ground. Last month, news dropped that the exchange was expecting to pay fines in order to settle the number of regulatory probes into its business. 

And perhaps the latest news that has investors shaking is Silvergate: the crypto-enabling bank today announced it would wind down operations. This comes after the firm last week delayed its annual SEC 10-K report filing because it needed “additional time” to allow an independent accounting firm to complete certain audit procedures—sending its stock plunging. 

“We note a shift in sentiment following Silvergate’s bankruptcy rumors last week,” Blockchain analytics company Kaiko’s Dessislava Aubert told Decrypt. “Bitcoin funding rates turned negative over the weekend hitting their lowest level in 2023.”


This all comes after a horrible year for digital assets in 2022—which ended spectacularly with mega digital asset exchange FTX going bust. Its ex-CEO and co-founder Sam Bankman-Fried is now facing 12 criminal charges for allegedly mismanaging the business and defrauding both his customers and his investors.

“Overall, liquidity conditions have deteriorated significantly since the collapse of FTX and volatility is unlikely to go away,” Aubert added. 

CoinShares Head of Research James Butterfill told Decrypt that current investor sentiment is “more to do with the regulatory crackdown and the ‘who the regulators will target next’ question” over the Federal Reserve’s moves. 

In fact, for the fourth week in a row, investors have pulled out cash from crypto funds, mainly due to “concerns over regulatory uncertainty for the asset class,” a Monday CoinShares report showed

Butterfill also said that investors are concerned about Silvergate’s woes. 

Trader Ryan Scott told Decrypt that “crypto has oddly underperformed equities, and this is probably due to the FUD [fear, uncertainty and doubt]” surrounding regulatory concerns around Binance and banking within crypto.

Since the start of the COVID-19 pandemic, and following an unprecedented injection of liquidity into the market from the Federal Reserve in an attempt to stimulate an ailing economy, crypto has closely tracked the stock market’s movements. Retail and amateur investors, flush with cash, “aped in” to crypto and meme stocks just the same throughout 2020 and into 2021 as a “frothy” market soared to new heights.


These days that correlation still holds true, only in the other direction: Investors sold-off “risk assets” like Bitcoin and tech stocks as the Fed upped its aggressive monetary policy, raising interest rates time and again in an attempt to get prices and record-high inflation under control. 

The market has mostly traded sideways for the last few months, but a turning point could come as soon as Friday, when the U.S. government drops its latest non-farm payrolls report, dictating the Fed’s next moves on whether or not to hike up interest rates even more. 

“That could really swing sentiment,” Butterfill said. 

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