Bitcoin rises 24% from Wednesday low

Cryptocurrency halts market slide

Bitcoin pared its substantial price plunge between Wednesday evening and Thursday morning, calming investor sentiment somewhat.

The world’s first and most popular cryptocurrency had already been weakened by Tesla CEO Elon Musk’s social media criticism.

However it sank by as much as 25% in just over 12 hours after Chinese authorities announced a ban on financial institutions and payment companies providing services related to cryptocurrency transactions.

One of the largest signals of an imminent sell-off was on-chain analysis firm Glassnode’s newsletter on Monday that recorded the fastest Bitcoin inflows into cryptocurrency exchanges since the 12 March 2020, when it sank by 40%.

Inflows are thought of as indicators of bearish sentiment, with investors and traders taking their Bitcoin out of cold storage and DeFi protocols to sell on centralised exchanges.

Smaller cryptocurrencies suffered even larger drops on Wednesday, with Ethereum and Ripple (XRP) falling by as much as 40% and 35%, respectively. Having started the day at just over $2trn (£1.4trn, €1.6trn), the total capitalisation of the cryptocurrency market sank as low as $1.4trn.

Having been largely responsible for responsible for a 20% reduction in the price of Bitcoin in the week preceding Wednesday’s sell-off, Elon Musk had become something of a hate figure for some in the crypto community.

The fact that the South Africa-born billionaire almost single-handedly stopped the market sell-off is likely to have reduced this ill will. Having taken with one hand, questioning Bitcoin’s environmental impact, Musk gave with the other, tweeting that Tesla had 'diamond hands' and would not thus be selling its substantial holding.

The ‘diamond hands' meme that has gained in popularity in the past year or so refers to a trader or investor who holds onto an investment despite its value dropping in the belief of longer-term vindication.

MicroStrategy CEO Michael Saylor has also announced that he had no intention to sell “a single satoshi” of the 111,000 BTC under his control, despite his company’s stock falling by as much as 14.8%.

Such statements buoyed market confidence.  By mid-morning Thursday, Bitcoin stood almost 25% above the low incurred almost 24 hours before at $39,992, while Ethereum and Ripple stood 32% and 21% higher, respectively.

Further reading: Crypto-related stocks tumble as sell-off deepens

Further reading: SafeMoon price prediction: is it safe and off to the moon?

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