Bitcoin is finally rallying again.
After weeks of pain for the world’s largest cryptocurrency,
bitcoin surged 10
percent to a high of $3,929.10 on Wednesday morning, according to
data from CoinDesk. The performance brought bitcoin’s three-day
gains to more than 22 percent.
Other top cryptocurrencies followed suit. XRP, the world’s second largest digital currency,
jumped 16 percent while ether rallied 13
percent, according to CoinDesk.
Still, 2018 has been a horrible year for most cryptocurrency
investors. Bitcoin is down more than 80 percent from its all-time
high hit almost exactly one year ago. This year alone, it’s down 72
percent and has struggled to attract new buyers.
Finding fresh buyers was hardly a problem last year. Bitcoin
first became a household name in 2017 as retail investors made
speculative bets on cryptocurrencies, raising money through initial
coin offerings. Regulators have stepped
up their oversight of the industry this year, cracking down on
fundraising projects that have failed to register with the SEC.
Other crypto founders have been charged as outright frauds.
Over the past six months, hundreds of the ICOs have been forced
to close up shop, which CoinFi CEO Timothy Tam said was a necessary
shakeout for the market.
“The garbage, or at least a good portion of it, is starting to
get collected,” Tam said. “Ultimately this strengthens the
market.”
Still, he underlined that a 10 percent bitcoin spike doesn’t
mean crypto prices are in the clear or that it’s “time to breath a
sign of relief.”
“If anything, it proves speculation still dominates and most —
not all, but most — are not trading in reality,” Tam told CNBC,
adding that he saw some institutional-level money flow into the
markets over the last 48 hours. Tam said certain investors had been
sitting on the sidelines, waiting for the market to find
bottom.
“It’s certainly a hell of a lot more cost efficient to buy now,”
he said. “The hope is that the market has culled jumpy retail
investors and, as regulators move in, we start to see some much
needed stability.”
Mati Greenspan, senior market analyst at eToro, said bitcoin’s
“impressive push from the floor” on Wednesday was also the result
of short covering.
“People are looking to reduce their exposure and closing out
high-risk sell positions before the holidays, and this is creating
upward pressure on market prices, which is ultimately resulting in
a rally,” Greenspan said.
Michael Moro, CEO of Genesis Global Trading, also saw an uptick
in short covering. He echoed Tam’s sentiment that bitcoin is not
quite out of the woods yet. Moro said he is not ready to call a
bottom until prices break toward the $4,000 ceiling.
“Buyers typically need to see prices holding for a few days
before they really step in, and I think $3,900 is a key short-term
level here before that really happens,” Moro told CNBC.
By midday Wednesday, bitcoin surrendered some of the morning’s
gains. It was trading at $3,774.85.