Bitcoin and other cryptocurrencies recovered on Wednesday after a brutal sell-off, with the world’s biggest digital coin climbing back above $30,000.
The price of bitcoin rose 6% in the last 24 hours, to $31,526 at 7:45 a.m. ET, according to Coin Metrics data. Smaller cryptocurrencies ether and XRP also rebounded, up around 9% and 6% respectively. The crypto market saw significant selling on Tuesday, with bitcoin falling below the $30,000 mark for the first time since June 22.
Vijay Ayyar, head of Asia-Pacific at cryptocurrency exchange Luno, said Wednesday’s price move was likely a “dead cat bounce,” where an asset briefly recovers from a prolonged decline before continuing to slide. Unless bitcoin can climb above $32,000-$33,000, Ayyar expects more downside, with the top cryptocurrency potentially tumbling as low as $24,000-$25,000.
“We saw broad market rallies across the board last night as well, and I think crypto is just playing off of that,” Ayyar told CNBC.
“In general, there are lot of macro factors weighing down on risk-on assets at the moment — inflation worries, Covid, and with crypto we’ve got more specific worries such as much more regulatory oversight.”
Bitcoin continued to rise as it broke above $30,000. This price represents a significant level of support for many cryptocurrency investors.
Bitcoin, the largest digital currency, gained as much as 5.8 percent and remained stable at around $31,450 as of 7:23 a.m. on Wednesday in New York. The Bloomberg Galaxy Crypto Index was also up, while a number of other cryptocurrencies such as Ether and Dogecoin also saw gains.
The market was worried that if Bitcoin’s price dropped below $30,000, according to Naeem Aslam, chief market analyst of Ava Trade Ltd. Truthfully, we haven’t noticed anything like that. There has been no sudden drop in the price of bitcoin, and the market appears to be calm.
Since mid-May, the value of Bitcoin and other cryptocurrencies has plummeted, losing an estimated $1.3 trillion. Bitcoin has encountered many challenges, including as increased regulatory attention in China, Europe, and the United States and worries about the energy needed by the machines supporting it.
People who invest are also often more wary of investing in speculative assets. Aslam of Ava Trade speculates that Bitcoin will still attempt to break below the $25,000 support level in the coming weeks.
The chief investment officer of Saxo Bank, Steen Jakobsen, has stated that a break over $32,000 would signal a bigger rebound. While Bitcoin and Ethereum staged a bounce after Bitcoin fell through the critical $30,000 mark yesterday, Jakobsen noted that Bitcoin needs to sustain a recovery above $32,000 in order to move out of its current predicament.
Dropping from almost $65,000 in April, Bitcoin’s year-to-date gain has slowed to around 8%. In comparison, the S&P 500 index is expected to increase by 15% in 2021. It is argued that the widespread adoption of virtual currencies will serve as a buffer against inflation, and that they will gain widespread acceptance from institutions.
Though Bitcoin’s most fervent followers continue to predict significant long-term returns, such narratives have always been contentious and are now under considerably more scrutiny.
In a report, Oanda senior market analyst for the Americas Edward Moya predicted that Bitcoin’s price would remain high due to regulatory and environmental concerns, but that the situation would improve on both fronts before the year’s end.
In addition, he said, institutional investors “are ready to put huge long-term commitments” if a drop toward $20,000 can be prevented.