NEW YORK, USA: Bitcoin has started recovering after a volatile week. The trend has been taken by some as a tentative sign the fragile digital currency could recover fully.
The world’s largest cryptocurrency was little changed at $36,425 as of 6:45 am in New York on Tuesday, following two straight sessions of gains.
Swings in the price — as measured by the spread between its daily high and low — have fallen to their lowest since the beginning of the year, despite reports over the weekend that US financial authorities are preparing to take a more active role in regulating the crypto market. Bitcoin’s 10-day volatility fell back to 106% from a high of nearly 162% on May 24.
“Despite another set of ‘negative headlines’ Bitcoin rose $2,000 over the weekend,” wrote Tom Lee, co-founder of independent research firm Fundstrat Global Advisors LLC in a note to clients.
“I can’t help but view this as reinforcing the likelihood Bitcoin has bottomed, given bad news is not creating new lows.”
Lee sees Bitcoin exceeding $125,000 before the end of the year, but is watching for a rise above $40,000 as a sign the digital currency has seen its lows for 2021.
Cryptocurrencies have experienced a torrid few months, with Bitcoin at one stage more than halving from its mid-April high on concerns about regulation from the likes of the US and China and questions about the toll of its energy requirements on the environment. Prominent digital currency advocate and Tesla Inc founder Elon Musk even went so far as to stop accepting Bitcoin as payment for vehicles.
“Crypto is a tough gig right now, the tape is messy, and Bitcoin could easily break hard one way or the other,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note.
On Thursday, Bank of Japan Governor Haruhiko Kuroda joined the chorus of central bankers casting doubt on Bitcoin following its latest surge and slide. The governor of Sweden’s central bank said on Monday that Bitcoin and other cryptocurrencies are unlikely to dodge regulatory oversight.
Still, some see the weekend’s relative calm as a sign that prices could recover, even as Bitcoin’s questionable environmental profile has eroded the argument that the token is bound to lure more mainstream investment.
It has risen about 20% from its May low just above the $30,000 level.
“As regulators engage there may be some unnerving headlines for the market, but engagement is a medium-term positive for institutional adoption,” said Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX. “There are some tentatively positive signs at least that the worst fears haven’t become a reality.”