Bitcoin’s star supporters and Dip buyers are helping cryptos recover

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© Reuters. A representation of the virtual currency Bitcoin can be seen in this illustration from May 19, 2021 in front of a stock graph. REUTERS / Dado Ruvic / illustration

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By Stanley White, Thyagaraju Adinarayan, and Vidya Ranganathan

LONDON / TOKYO (Reuters) – has lost ground to near to near on Thursday, a day after a brutal sell-off amid concerns about stricter regulation in China and unease over the extent of leverage in the cryptocurrency world 40,000 USD to trade.

The largest and most popular cryptocurrency surged 9% to below $ 40,000 after falling 14% on Wednesday to its lowest level since late January. The smaller competing ether rose 11% to $ 2,700 at 0829 GMT after falling 28%.

The upturn came after prominent crypto supporters such as Ark Invest’s Cathie Wood and automaker Tesla (NASDAQ 🙂 Elon Musk expressed their support on Wednesday. Wood said in an interview with Bloomberg that she is still sticking to her $ 500,000 forecast.

Musk reiterated that Tesla was sticking to its Bitcoin investments.

“People see this as a ‘buy the dip’ moment, and many see this as ‘the last chance to buy Bitcoin cheaply,'” said Ruud Feltkamp, ​​general manager of the crypto trading bot Cryptohopper. “The next few months will tell if the bull market continues or if it is the beginning of the end of its run.”

The decline in both digital assets on Wednesday was one of their biggest daily percentage moves in more than a year as investors rushed to exit trades that until recently outperformed traditional markets like stocks and bonds.

The most recent catalyst was a statement by the Chinese financial industry that banned the use of cryptocurrencies in payment and settlement and prohibited institutions from providing crypto-related products or exchanging services between cryptocurrencies and the yuan or foreign currencies.

But Bitcoin has been under pressure for almost a week after a series of tweets from Musk, a big supporter of the cryptocurrency, largely reversed, that Tesla had accepted Bitcoin as a means of payment, was reversed.

Analysts said the upheaval is far from over.

“It’s too early to say if the rebound we saw from the lows in Crypto has any legs,” said Chris Weston, chief research officer at brokerage Pepperstone in Melbourne.

“I wonder if we will get a chance to catch our breath or if there is more volatility in store?” he said.

Weston noted that $ 9.13 billion in cryptocurrency positions were liquidated on exchanges over a 24-hour period, for a total of $ 532 billion.

The decline forced some investors to close leveraged positions in cryptocurrency derivatives, causing further price drops and pushing digital assets into lower trading ranges, traders said.

After jumping six times due to the increased use of non-fungible tokens on digital art platforms, the Ether sell-off was far more damaging as digital currency trading was 39% below record levels.

James Quinn, executive director of Q9 Capital, a Hong Kong-based private cryptocurrency asset manager, said the sale reflected huge overcrowded positions on the airwaves.

“Sometimes a market event looks for a reason. I think this is about positioning. In the long run, it may be positive because very crowded trading with lots of new entrants means there are lots of new entrants,” added Quinn.

Still, ether is up more than 270% so far this year, and Bitcoin’s year-to-date earnings are 37%.

While some retailers saw missed opportunities on the slide, others saw the router as an opportunity to acquire digital assets cheaply.

Milko Markov, an independent trader based in London, said he bought ether.

“Those with a little more experience in the crypto market know two basic rules: no leverage and dollar cost average,” he said. (Graphic: Bitcoin slumped 14% on May 19 – the worst sell-off since March 2020, https://fingfx.thomsonreuters.com/gfx/buzz/ygdpzoebnvw/Pasted%20image%201621502104522.png)

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