Bitcoin breaks above $40,000 as market rallies

·3 min read
'Bitcoin prices continue to recover from their recent hangover,' said one expert. Photo: Getty Images
'Bitcoin prices continue to recover from their recent hangover,' said one expert. Photo: Getty Images

Cryptocurrencies are continuing to recover from the weekend sell-off, with bitcoin crossing the $40,000 (£28,258) mark. It still remains far from its record-high of $63,000 though, which it hit earlier this year.

Bitcoin (BTC-USD) was up 4.2% to trade at $40,500 on Wednesday morning. Ethereum (ETH-USD), the second-biggest cryptocurrency by market cap, was up roughly 9.4%, trading at $2,896. Joke token dogecoin (DOGE-USD) rose 1.1% to trade at $0.36.

"Bitcoin prices continue to recover from their recent hangover," said Naeem Aslam, chief market analyst at Ava Trade.

"The fact is that bitcoin was due for a correction, and it seems like the sell-off may be over now."

He said: "The single biggest threat when the sell-off started was that we might begin to hear some of the bullish stace easing off among institutional traders. However, that is not what we saw; in fact, many institutions considered the sell-off as an opportunity and started to bag some bargains."

Bitcoin was up on Wednesday morning. Chart: Yahoo Finance
Bitcoin was up on Wednesday morning. Chart: Yahoo Finance

Going forward, he said investors will keep an eye on regulations. He doesn't think the US would ban bitcoin but expects it to tighten regulations.

Hossein Azari, founder of cmorq, a company that provides data tools to access blockchains, said: "On the one hand, figures like Janet Yellen [US Federal Reserve governor] are worrying about crypto. But if this was a reality, they'd be doubling down on policies that outlaw bitcoin.

"The fact the Treasury Department hasn’t taken any meaningful crackdown is a signal that it recognises the value this technology has for the US economy."

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Aslam also said that with concerns around bitcoin's environmental impact, it is likely "we will see the curve shifting towards carbon-neutral than anything else, and that should continue to support the market even more."

Earlier, bitcoin prices had crashed when Tesla (TSLA) said it would stop accepting the crypto due to concerns about its carbon footprint.

And as far as institutional money flow goes, Aslam said "we see a strong commitment from the US institutions, and there doesn’t seem to be any signs of that flow easing off any time soon."

The crypto recovery comes after a deep sell-off over the weekend. By Sunday afternoon, the global crypto market had lost 9% over the last 24-hours, according to data provider CoinMarket.

The slump followed a volatile week, which included talk of a crackdown in China.

Last week Chinese vice-premier Liu Hu said China would "severely crack down on illegal securities activities and severely punish illegal financial activities."

But Matthew Graham, CEO of Sino Global Capital, told CNBC: “Chinese traders still wield enormous influence... the waning influence of Chinese bitcoin traders is an exaggerated story."

Watch: What are the risks of investing in cryptocurrency?

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