Crypto markets rallied on Thursday, shrugging off a tougher regulatory stance from the U.S. government.

Bitcoin surged 11% to $24,655.94 at around 3:36 a.m. ET while ether was up more than 8% at $1,684.59, according to CoinDesk.

The value of the entire cryptocurrency market rose more than $84.8 billion in the 24 hours before 3:39 a.m. ET.

There are “ increasing signs that the market bottomed last November and has turned bullish,” Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC.

“We are gaining in momentum here and any bad news is being shrugged off, typical signs that the market believes the worst is over.”

Crypto markets were on edge earlier this week following increased regulatory scrutiny from U.S. authorities on digital currencies.

On Monday, the New York State Department of Financial Services told Paxos to stop minting new Binance USD, or BUSD, stablecoins. A stablecoin is a type of cryptocurrency pegged to a real-world asset and some are backed by assets such as bonds or cash. BUSD is pegged one-to-one to the U.S. dollar.

Paxos also confirmed that the Securities and Exchange Commission has notified the company that the agency could recommend an action that alleges BUSD is a security. The SEC has not yet formally levelled any charges against Paxos.

Bitcoin’s price on Thursday sat at its highest level since mid-August 2022. Last year, nearly $1.4 trillion was wiped off the crypto market after turmoil which saw bankruptcies, failures of projects and companies. All that was topped off by the collapse of major exchange FTX.

Yuya Hasegawa, an analyst at Japanese crypto firm Bitcoin Bank, said there is a shift from so-called altcoins, or alternative coins, to bitcoin in the wake of the regulatory action.

“Wednesday’s crypto rally was a bit of a surprise but one thing stood out: it was led by bitcoin,” Hasegawa told CNBC.

“The current regulatory environment surely looks like a headwind for the crypto market, but it seems like some money is moving from altcoins to bitcoin, since bitcoin is the only cryptocurrency that is labeled ‘commodity’ by the SEC chair. Consequently, bitcoin’s market dominance is on the rise.”

Gary Gensler, chair of the SEC, reiterated last year that the agency views bitcoin as a commodity rather than a security. Commodities are assets like gold whereas stocks are considered securities. They are regulated differently.

Rising interest rates from the Federal Reserve designed to fight inflation also weighed on crypto markets. Bitcoin is also closely correlated to equity markets and in particular the tech-heavy Nasdaq index. The Nasdaq is up about 16% year-to-date. Bitcoin has outperformed the index and is up 49% this year.

Bullish sentiment in risk assets has been aided by a view that the economic downturn might not be as bad as expected, and the Fed might slow down the pace of interest rate hikes.

“In general, the markets like the fact that inflation is coming down, interest rate hikes are slated to ease from here, but also that we may end up with either no big recession or something very mild,” Ayyar said.