Bitcoin extended its gains in Asian trade on Wednesday, rallying back after a plunge below the $30,000 barrier earlier in the day spooked investors.
As of 9:38 a.m. in Hong Kong, the largest cryptocurrency had gained 4.5 percent and was trading at $33,837. During U.S. trading hours on Tuesday, the coin fell 12 percent to $28,824, temporarily putting it in negative territory for the year. It hadn't been below $30,000 since January before that.
Bitcoin has dropped more than half of its value since reaching a peak of about $65,000 in mid-April. Following a fourfold gain in 2020, the coin began trading over $29,000 in 2021.
Such trading indicates that “Bitcoin traders may find themselves in choppy waters for weeks to come,” according to Sean Rooney, head of research at crypto asset manager Valkyrie Investments.
Bitcoin, which failed to stay over $40,000 last week, could struggle to find support in the $20,000 zone, according to chartists, following its slide below $30,000. Despite this, Bitcoin had previously breached $30,000 on at least five occasions this year, but had recovered to trade above that level each time.
“Any substantial break below $30,000 will cause a lot of momentum players to sell,” said Matt Maley, chief market strategist at Miller Tabak + Co. “Thus, even if Bitcoin has the potential to alter the world in the long run, it does not rule out the possibility of it reverting to the teens in the short term.”
It's a spectacular drop for the digital asset, which was climbing higher just weeks ago amid a warm embrace from Wall Street and retail investors. However, negative publicity over its energy use, sparked mostly by Elon Musk of Tesla Inc., as well as a Chinese crackdown, have pushed it lower in recent weeks.
China's newest salvo came on Monday, when the country's central bank announced that representatives from the country's largest banks, as well as AliPay, had been summoned to restate the country's ban on cryptocurrency services. Officials in China are already attempting to shut down crypto mining businesses.
“Bitcoin's prolonged sell-off has added to traders' gloomy perspective, which has been fueled by unfavourable news out of China,” said Nick Mancini, a research analyst at crypto sentiment analytics firm Trade The Chain. “Traders' morale is continuing to deteriorate.”
Bitcoin and other cryptocurrencies are prone to exuberant gains and rapid drawdowns. Bitcoin experienced a renaissance in 2017, increasing more than 1,000 percent, only to drop by around 75% the following year. And it grew by 300 percent last year.
“Cryptocurrency is the most speculative portion of the market,” says Eric Diton, president and managing director of The Wealth Alliance. “At the end of the day, acceptance and increased demand and supply define the value of Bitcoin. When a country like China declares war on Bitcoin, it severely damages its global acceptance, which is why its value has plummeted.”
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