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Bitcoin bounces back after erasing 2021 gains

Bitcoin bounceback has been welcomed by crypto traders. Photo: Reuters
Bitcoin bounceback has been welcomed by crypto traders. Photo: Reuters

Cryptocurrencies were broadly higher on Wednesday morning, recovering from a sell-off that saw bitcoin plunge below $30,000 (£21,495) and lose all gains made in 2021 amid regulatory action in China.

Bitcoin (BTC-USD) ticked up 3.4% to trade at $33,941 ($24,286). Ethereum (ETH-USD) – the second biggest crypto by market cap – was up 3.3% and was trading at $2,004. Joke token dogecoin (DOGE-USD) surged about 8%, and was trading at $0.22.

Bitcoin ticked up on Wednesday morning. Chart: Yahoo Finance UK
Bitcoin ticked up on Wednesday morning. Chart: Yahoo Finance UK

“The bears have control of the crypto market but today we do see some sign of a relief rally,” said Naeem Aslam, chief market analyst at Ava Trade.

“The bounce back in the bitcoin price is seen a welcoming sign by many crypto traders although we are no way close to be out of the woods yet,” he said, adding that institutional investors remain interested in the blockchain industry.

One example of this is Blockchain Capital, a crypto venture capital firm, which recently raised $300m in funding from industry titans such as Visa and PayPal.

“The recent drop in the value of bitcoin may be an opportunity for investors to purchase the asset at bargain prices, increasing the number of players in the crypto industry.”

Earlier, commenting on the sell-off, Simon Peters, cryptoasset analyst at multi-asset investment platform eToro had said that “in the long-term this market transition could be very beneficial to bitcoin and crypto more broadly.”

Watch: What is bitcoin?

Read more: Cryptocurrency crimes hit 8,000 a year as scammers flock to the market

He said decentralising crypto mining and ending Chinese dominance when it comes to mining could give a boost to other more crypto-friendly countries.

Over the past few days, action in China had caused a sell-off: the People's Bank of China encouraged Alipay and other large institutions to crack down on cryptocurrency trading, while the country extended the clampdown on the bitcoin mining industry to its biggest bitcoin producing provinces, including the southwest province of Sichuan.

"For long-time, serious crypto investors this week has not been a major cause of concern and more a case of ‘here we go again'," said Nigel Green, CEO of financial advisory organisation deVere Group.

"For many investors, experienced and less experienced, the new lower prices triggered by the panic-selling, will be used as a key buying opportunity. Even those in China – which is a major market for bitcoin and the wider crypto sector - will find ways to navigate their way around the system and top-up their portfolios at the lower entry points."

He said he expects to see further pull-back in the price of bitcoin in the near-term, "which too will be used proactively by investors.”

Watch: What are the risks of investing in cryptocurrency?

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