Despite today’s rebound, bitcoin prices are down about 70% so far this year.
Bitcoin prices rallied 10% on Wednesday to more than $4,100, putting it on course for its biggest daily rise since mid-April as it pulled itself out of a recent slump. The world’s biggest and best-known cryptocurrency hit a daily high of $4,157, its strongest in four days on the Bitstamp exchange. Other cryptocurrencies also rose. Bitcoin has lost more than a third of its value in the last two weeks amid heavy selling pressure. In a broad sell-off in cryptocurrencies over the last two weeks, bitcoins, the world’s biggest cryptocurrency, have lost more than 70% of its value this year. Bitcoin prices had hit nearly $20,000 in December last year. Mainstream investors have stayed clear of bitcoin, with concerns over scant regulatory oversight and undeveloped market infrastructure compounded by frequent swings in price. Analysts said the US Securities and Exchange Commission was partly to blame for the recent sell-off, with the delay in its approval of new bitcoin instruments, as well as for its investigations of initial coin offerings and crypto exchanges.
The SEC has ordered civil penalties against Airfox and Paragon Coin that sold digital tokens deemed as securities in initial coin offerings. Those companies have agreed to return funds to harmed investors, register the tokens as securities, file periodic reports with the Commission, and pay penalties.
Bloomberg had earlier reported that the US Department of Justice had initiated an investigation of cryptocurrency Tether over possible manipulation of bitcoin prices at the end of last year.
Cryptocurrency advocates say bitcoin is still young and price volatility is to be expected. Many predict the need for virtual currencies that operate beyond mainstream banking will outlast any short-term price falls.
Ten years ago, Satoshi Nakamoto, bitcoin’s still-unidentified founder, released a white paper detailing the need for an online currency that could be used for payments without the involvement of a third party, such as a bank.
Cryptocurrencies are here to stay despite a prolonged slump this year, and will gain wider acceptance after the recent entry of more institutional investors in the space, Mohamed El-Erian, chief economic adviser at Allianz, said on Tuesday.
At a CoinDesk conference called “Consensus: Invest in New York,” El-Erian said the participation of institutional investors in various crypto projects, even as retail investors have shied away because of price declines, was a positive sign.