Recently, a variety of factors have come together to spark a major comeback for cryptocurrencies. Bitcoin will surge in 2023, up 50%, while ether is up more than 40%, according to Coin Metrics. Those gains come after a difficult 2022 for the crypto market. Last year, bitcoin plummeted 65% and ether lost almost 68%. Those losses come as monetary policy tightens around the world and investors move money into more traditional assets and away from riskier ones. Regulatory concerns also grew following major crashes for certain stablecoins and the collapse of FTX. This year, however, it looks like the already downhill crypto space is getting some favors. Bernstein analyst Gautam Chhugani says that recent regulatory actions may not be as bad as people think, helping to push crypto prices higher. “The initial legal actions, known as ‘Operational bottlenecks,’ led to concerns that cryptocurrencies are actively being withdrawn from the banking system, with an attack on stablecoins and custody rules. ,” he wrote in a note Thursday. A stablecoin is a cryptocurrency that attempts to maintain a more stable price by tying its value to an underlying asset, such as gold or cash. The collapse in 2022 of the algorithmic stablecoin terraUSD prompted a massive drop in the cryptocurrency, wiping billions of dollars of value off the market. Recently, crypto firm Paxos said it would stop issuing stablecoin Binance USD, as directed by the New York state financial regulator. BTC.CB = Bitcoin Mountain 1D . “Overall, the front-runner cryptocurrency is still more tightly regulated in the US, but it’s not a knock-out.” Chhugani also noted that while US regulations tend to dominate the news, elsewhere globally, regulation and sentiment are more upbeat. “Although US regulations appear to be getting tougher, regulatory complaints from Hong Kong appear to be very positive, with an easing of regulations expected,” said Chhugani. ,” Chhugani added that he “would not be surprised if the crypto market was led by Asia. start with, until regulatory concerns subside in the US” Short-term insurance can also contribute to a cryptocurrency spike. Short-selling insurance occurs when a short seller buys back shares shares to close an open short position — return borrowed shares — to limit losses This also pushes the price of the underlying security even higher, but there’s more to it than just short-term compensation – there is a new buying force taking place forcing prices up, the company said. Chhugani wrote: “Although strong price movements are affected by short-term offsets, we believe that strong price increases also is forcing existing crypto investors to increase their exposure to any big moves.” He added: “The crypto liquidity funds we talk about have a fairly conservative exposure. While new capital may be slow to get into the space, there’s still enough un-deployed capital in the ecosystem of crypto funds, much of it still at risk- for now.” —Michael Bloom of CNBC contributed to this report.