Bitcoin extends gains, climbing above $32,000 as cryptocurrencies rebound from sell-off

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A bitcoin sign with a graph pictured in the background.

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Bitcoin and other cryptocurrencies recovered Wednesday after a brief sell-off, with the world’s biggest digital coin climbing back above $30,000.

The price of bitcoin traded as high as $32,765 Wednesday, according to Coin Metrics, and last traded at 31,641, about 6% up on the day. Smaller cryptocurrencies ether and XRP also rebounded about 6% each.

The crypto market saw significant selling on Tuesday, with bitcoin falling below the $30,000 mark for the first time since June 22.

The plunge came on the back of news that the New Jersey attorney general issued a cease-and-desist letter to crypto lending firm BlockFi, ordering it to stop offering interest-bearing accounts.

The reason for the move higher Wednesday wasn’t immediately clear. Cryptocurrencies often undergo severe price swings. Bitcoin, for example, rallied to an all-time high of almost $65,000 in April before halving in value in the months that followed.

The price of ether jumped about 1.5% in the afternoon after Tesla CEO Elon Musk disclosed he owns some of the cryptocurrency, as well as bitcoin and dogecoin, in the online event “The B Word.”

‘Dead cat bounce’

Vijay Ayyar, head of Asia-Pacific at cryptocurrency exchange Luno, said Wednesday’s price move was likely a “dead cat bounce,” where an asset briefly recovers from a prolonged decline before continuing to slide.

Unless bitcoin can climb above $32,000-$33,000, Ayyar expects more downside, with the top cryptocurrency potentially tumbling as low as $24,000-$25,000.

“We saw broad market rallies across the board last night as well, and I think crypto is just playing off of that,” Ayyar told CNBC.

“In general, there are lot of macro factors weighing down on risk-on assets at the moment — inflation worries, Covid, and with crypto we’ve got more specific worries such as much more regulatory oversight.”

Regulatory pressure

Cryptocurrencies have been on a downward trajectory amid a growing crackdown on the industry from regulators around the world.

In China, authorities have sought to stamp out cryptomining, the process that validates transactions and produces new coins. Binance, the world’s largest crypto exchange, is facing intensifying pressure from regulators in the U.K., Italy and elsewhere.

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