Bitcoin swung between gains and losses on Thursday, as the world’s largest cryptocurrency battled to rebound following a significant sell-off the day before.
According to Coin Metrics data, the digital currency rose initially Thursday morning, reaching as high as $40,700 before falling as low as $38,965. It was last trading at $39,980, up 2.6 percent.
On Thursday, several of bitcoin’s younger rivals made a recovery, with ether up 2.2 percent to $2,676 and litecoin up 3% to $209.
It follows a precipitous drop in bitcoin markets. Bitcoin fell about 30% to about $30,000 on Wednesday, before recovering some of its losses later in the evening. In a single day, the whole crypto market erased hundreds of billions of dollars in valuation.
Mixed signals from Tesla CEO Elon Musk, who came out as a bitcoin supporter earlier this year, and a government crackdown on the market in China certainly fueled the decline.
Musk announced on May 12 that his electric car company had halted bitcoin vehicle purchases owing to environmental worries about the cryptocurrency. According to Cambridge University experts, Bitcoin consumes more energy than whole countries such as Argentina and Ukraine. This is due to the energy-intensive “mining” process that produces new bitcoins.
Musk hinted that Tesla may have sold its bitcoin holdings earlier this week, only to subsequently clarify that the company had “not sold any bitcoin.” He tweeted the emoji “diamond hands” on Wednesday, hinting that the electric car producer will keep all of its bitcoin.
The price of bitcoin is also being influenced by other factors. China’s prohibition on financial institutions and payment corporations offering cryptocurrency-related services was announced on Wednesday, confirming the country’s strong stance on digital currencies.
“If you look at the history of bull markets, a correction of this size, between 30-40% of bitcoin price, tends to be part of the bull market,” Alyse Killeen, founder and managing partner of bitcoin-focused venture capital firm Stillmark Capital, told CNBC Wednesday.
However, there have been some signals of froth in the cryptocurrency market recently. Dogecoin, a meme-inspired digital currency, saw a spectacular run earlier this year, fueled by positive remarks from Musk and other celebs such as Mark Cuban and Gene Simmons.