Bitcoin Gains as Bulls' Buying Helps Soothe Nervous Investors




  • In Business
  • 2021-02-24 18:39:33Z
  • By Bloomberg
 

(Bloomberg) -- Bitcoin rebounded from its sharp selloff of the past few days as additional purchases by MicroStrategy Inc. and Square Inc. helped to ease concern investors were starting to exit the famously volatile cryptocurrency.

The digital token rose as much as 7% Wednesday, finding support near the $50,000 level. It traded around $49,930 as of 1:39 p.m. in New York. Prices plummeted about 13% on Tuesday in the worst retreat in a year.

Square said it had purchased $170 million in Bitcoin, raising its holdings to about 5% of the company's cash and equivalents. MicroStrategy said it paid an average $52,765 for nearly 20,000 tokens last week after issuing $1.05 billion in convertible bonds.

Overall investor sentiment has also been boosted by comments Tuesday from Federal Reserve Chair Jerome Powell, who signaled the central bank is nowhere close to unwinding its easy policy. Cryptocurrencies have been buoyed by a tide of monetary and fiscal stimulus to fight the impact of the pandemic.

"The rebound was helped along by a concurrent recovery in stocks as the Fed chair reassured the market of the central bank's ongoing commitment to pursue ultra-accommodative monetary policy," said Joel Kruger, cryptocurrency strategist at LMAX Digital.

The cryptocurrency rally is at the center of one of the hottest debates in financial markets. Believers see an emerging asset class being 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 world's largest digital asset's famed volatility is likely to continue.

"Bitcoin continues to see massive realized volatility," said Gary Pike, head of trading at London-based B2C2. "We expect continued volatility going forward whether from forced liquidations to the downside or more capital flowing into the space causing further upward momentum."

Globally, regulators are keeping a close watch. The Bank of Portugal on Wednesday reiterated previous advisories to consumers about virtual assets like Bitcoin due to their recent volatility. That follows a warning from Sweden's financial watchdog about selling exchange-traded crypto-tracking products to average consumers. Meanwhile, the Biden Administration also signaled concerns with Treasury Secretary Janet Yellen calling Bitcoin an "extremely inefficient way of conducting transactions" earlier this week.

Still, cryptocurrencies continue to gain support from financial heavyweights. Cathie Wood, the head of Ark Investment, said in a Bloomberg interview Tuesday that she's "very positive on Bitcoin, very happy to see a healthy correction here."

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