Here's Why Bitcoin Keeps Rallying While Regulatory Hearings Are Happening

After a sharp rebound in prices yesterday, most major cryptocurrencies are adding to their gains on Wednesday. Bitcoin (BTC-USD) is up by more than 16% as of this writing, and other major digital currencies are all posting double-digit gains.

Interestingly, these gains are coming while the Senate is holding hearings to explore the possibility of cryptocurrency regulations in the United States. Here's why the market could actually be optimistic about the prospect of a regulated U.S. cryptocurrency industry.

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Today's cryptocurrency prices

Virtually all major cryptocurrencies are up double digits on Wednesday, adding to the impressive performance from Tuesday. While most are still negative for the past week, and for 2018, they have certainly made up a lot of ground. Bitcoin (BTC-USD), for example, is more than $2,250 above its two-day lows.

Here's a look at the five largest cryptocurrencies by market capitalization, and how much each has changed over the past 24 hours.

Data source: www.investing.com. Prices and daily changes as of Feb. 7, 2018, at 1:50 P.M. EST, and  rounded to the nearest cent where appropriate.

There's no major news fueling these gains. On the other hand, there isn't any bad news (other than some pessimistic comments by billionaire investors), and after the seemingly never-ending stream of negative headlines over the past few weeks, an absence of bad news could be enough to fuel a mild rebound like this.

Cryptocurrency regulation could be a good thing after all

The Senate Banking Committee held a hearing on Tuesday on cryptocurrency regulation, with the chairmen of the SEC and the Commission and Commodity Futures Trading Commission both testifying.

Now, the prospect of more regulation may sound like a potential negative catalyst at first. After all, it was worries about regulatory activity in places like South Korea, China, and India that fueled the massive drop in cryptocurrencies through the first five weeks or so of 2018.

However, don't be so sure in this case. The general tone of the hearing, as well as from previous SEC warnings, has been that we need to protect consumers without inhibiting the growth and development of cryptocurrencies and blockchain technology. Most would agree that protecting consumers from things like fraudulent ICOs is certainly a worthwhile cause.

Furthermore, the current lack of regulation is a major roadblock standing in the way of investment options like bitcoin (BTC-USD) and other cryptocurrency ETFs listing on major exchanges. Currently, there are bitcoin futures available and one high-premium bitcoin fund known as the Bitcoin Investment Trust (GBTC -1.42%), but there are no ETF products that allow investors to get exposure to cryptocurrencies for a reasonable premium and fee structure on the market yet.

In fact, several applications have been submitted to the SEC for various cryptocurrency ETFs, and the SEC specifically cited lack of regulations on the rapidly growing industry as a reason for rejection.