Bitcoin extended its gains in Asian trading on Wednesday, bouncing back after a dip below the $30,000 level 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, briefly putting it in negative territory for the year. It hadn’t been below $30,000 since January before that.
Bitcoin has lost more than half of its value since reaching a high of nearly $65,000 in mid-April. Following a fourfold increase in 2020, the coin began trading around $29,000 in 2021.
According to Sean Rooney, head of research at crypto asset manager Valkyrie Investments, such trading signals “that Bitcoin traders could find themselves in choppy waters for weeks to come.”
Bitcoin, which failed to stay above $40,000 last week, could struggle to find support in the $20,000 range, according to chart analysts, following its drop below $30,000. Nonetheless, Bitcoin had broken through $30,000 at least five times this year prior to Tuesday, but had always recovered to trade above that level.
“Any meaningful break below $30,000 is going to make a lot of momentum players to throw in the towel,” said Matt Maley, chief market strategist for Miller Tabak + Co. “Therefore, even if Bitcoin is going to change the world over the long-term, it does not mean it cannot fall back into the teens over the short-term.”
It’s a remarkable drop for the digital asset, which was climbing higher just weeks ago amid a warm embrace from Wall Street and retail investors. However, negative attention about its energy use, sparked largely by Elon Musk of Tesla Inc., as well as a Chinese crackdown, have pushed it lower in recent weeks.
China’s latest salvo came on Monday, when the country’s central bank announced that officials from the country’s largest banks, as well as AliPay, had been summoned to reiterate the country’s ban on cryptocurrency services. Officials in China are already attempting to shut down crypto mining operations.
“Bitcoin’s continued sell-off has contributed to a negative outlook by traders driven by bearish news out of China,” said Nick Mancini, research analyst at crypto sentiment analytics provider Trade The Chain. “The mood among traders is now continuing to sour.”
Bitcoin and other cryptocurrencies are prone to exuberant rallies and rapid drawdowns. Bitcoin experienced a renaissance in 2017, rising more than 1,000 percent, only to drop by roughly 75% the following year. And it grew by 300 percent last year.
“The most speculative part of the market is cryptocurrency,” said Eric Diton, president and managing director of The Wealth Alliance. “At the end of the day, what determines the value of Bitcoin is acceptance and more demand and supply. When you have a country like China come out against Bitcoin, that really hurts it’s global acceptance and that’s why you’re seeing the value deteriorate as much as it has.”
