Two contrasting stories concerning cryptocurrency are currently in the news. First, bitcoin pulled off a strong rally this month, renewing investor appetite for the world’s largest cryptocurrency. Second, Do Kwon, the co-founder of Terraform Labs -- once a high-flying darling of the crypto market before crashing spectacularly -- was arrested in Montenegro on March 23.

Few people can deny the fact that cryptocurrencies tend to be more volatile than other traditional investment tools. The crypto market, still relatively new for mainstream investors, tends to swing dramatically, sometimes turning investors into billionaires overnight -- or penniless victims.

The recent rally of bitcoin is drawing attention not only from investors, but also from policymakers. Bitcoin has gained almost 20 percent this month and 66 percent this year.

A closer look at what happened in connection with the latest banking crisis in the US reveals bitcoin’s solid footing. From a recent dip on March 10 when the Silicon Valley Bank collapsed, the price of bitcoin has climbed by a respectable 36 percent to trade at $27,570 on Sunday.

Most investors remain jittery about the financial market in general and the banking sector in particular. The collapse of SVB, the 16th-biggest bank in the US, sparked a series of unnerving developments such as another flameout of a US bank and the spread of a crisis in Europe like the sell-off of Zurich-based Credit Suisse to its rival USB.

Some analysts hold the view that the popularity of bitcoin stems from weakening confidence in the traditional banking sector. In other words, investors are rushing for an alternative to protect their dollars at a time when some banks confront sweeping challenges including a bank run, and bitcoin is regarded as an attractive safe haven for its essential nature of being a decentralized form of money that cannot be controlled by any single entity.

Analysts now predict that the cryptocurrency could test new highs this year even though the global banking sector is expected to face pockets of stresses. It is ironic that bitcoin, the very symbol of cryptocurrencies, is deemed as an alternative to the latest banking system while SVB’s main depositors include crypto firms.

While bitcoin’s surge may testify to the potential of the decentralized currency system, Do Kwon’s arrest illustrates the other side of the coin. Kwon was wanted by not only South Korean police, but also the US Securities and Exchange Commission. In September last year, Interpol issued a red notice for his arrest.

Kwon, once dubbed the “Korean Elon Musk,” founded Terraform Labs in 2018 and scored a big success with the firm’s two cryptocurrencies -- terraUSD and luna -- on the global coin market. TerraUSD was designed as a stablecoin, pegged to stable assets like the US dollar. It was backed by its sister token luna.

The good days of Terraform Labs did not last long. In May last year, terraUSD was depegged from the US dollar. As a result, the prices of terraUSD and luna nose-dived to near zero. Due to the crash of the stablecoin, some 280,000 investors around the world suffered losses estimated at around $40 billion.

Investors in terraUSD and luna filed complaints against Kwon, accusing him of orchestrating a Ponzi scheme with the two coins.

The question now is what investors and policymakers should make of the conflicting developments illustrated by the strong market performance of bitcoin and the shocking failure of the stablecoin made by the disgraced entrepreneur, of whom Korean prosecutors are now seeking the extradition.

On Friday, Lee Seung-heon, senior deputy governor of the Bank of Korea, told policymakers at a forum held by the ruling People Power Party that the traditional bank-based financial system is now closely linked with cryptocurrency assets.

Experts at the forum pointed out two conflicting views on the crypto market: Optimists predict the advent of a “crypto spring” in line with the rally of bitcoin, while pessimists remain skeptical about the market saddled with high volatility.

It is anybody’s guess in which direction the crypto market will move, but Korean financial regulators and policymakers have to jointly seek more policy measures to better protect investors against possible spikes in financial risks linked with the crypto volatility.