The digital token rose 7% on Wednesday to almost $ 50,000 after sinking 13% on Tuesday.
Bitcoin has rebounded from its massive selloff in recent days, as additional purchases from MicroStrategy Inc. and Square Inc. helped allay concerns among investors who were starting to exit the notorious volatile cryptocurrency.
The digital token rose 7% on Wednesday, finding support near the $ 50,000 level. It was trading around $ 49,860 at 12:51 PM in New York. Prices fell about 13% on Tuesday in the worst retreat in a year.
Square said it bought $ 170 million in Bitcoin, bringing its holdings to around 5% of the company’s cash and cash equivalents. MicroStrategy said it paid an average of $ 52,765 for nearly 20,000 tokens last week after issuing $ 1.05 billion in convertible bonds.
General investor sentiment was also boosted by comments on Tuesday from Federal Reserve Chairman Jerome Powell, who signaled that the central bank was far from unwinding its ease policy. Cryptocurrencies have been supported by a wave of monetary and fiscal stimulus to combat the impact of the pandemic.
“The rebound was helped by a simultaneous rally in stocks as the Fed chairman reassured the market of the central bank’s continued commitment to pursue ultra-accommodative monetary policy,” said Joel Kruger, crypto strategist -currency at LMAX Digital.
The cryptocurrency rally is at the center of one of the hottest debates in the financial markets. Believers see an emerging asset class embraced by long-term investors, not just speculators. Critics fear Bitcoin is in a bubble that will inevitably burst. What the two sides seem to agree on is that the notorious volatility of the world’s largest digital asset is likely to continue.
“Bitcoin continues to experience massive realized volatility,” said Gary Pike, head of trading at London-based B2C2. “We anticipate continued volatility going forward, whether it is downward forced liquidations or additional capital inflows into the space, which will drive new upward momentum.”
Globally, regulators are watching closely. The Bank of Portugal on Wednesday reiterated previous warnings to consumers about virtual assets such as Bitcoin due to their recent volatility. This follows a warning from the Swedish financial watchdog regarding the sale of exchange-traded crypto-tracking products to average consumers. Meanwhile, the Biden administration also raised concerns over Treasury Secretary Janet Yellen, calling Bitcoin “an extremely inefficient way of conducting transactions” earlier this week.
Yet cryptocurrencies continue to benefit from the support of financial heavyweights. Cathie Wood, head of Ark Investment, said in an interview with Bloomberg on Tuesday that she was “very positive on Bitcoin, very happy to see a healthy correction here.”