Bitcoin remains on a strong footing even as bulls failed to capitalise after it hit the psychological mark of $50,000 earlier this week. Though the largest cryptocurrency in the world has slipped a little to hover around $48,000, one cannot entirely dismiss the possibility of bulls claiming the market in the coming weeks.
For the first time in three months -- after a brutal sell-off had bruised the coin and the entire market -- Bitcoin broke above $50,000 earlier this week. It hit as high as $50,152, but it soon underwent profit booking.
In May, the bitcoin and altcoin prices had seen a massive correction. Bitcoin had seen a correction of about 50-60 percent from its all-time high of $65,000 in mid-April, after a series of reports against the coin hit investor optimism.
At the time, the market was weighed down by the worries of environmental cost of bitcoin mining. It was only after Tesla Chief Elon Musk and Ark Investment's Cathie Wood supported the coin, that it rebounded slightly to trade in the $30,000-$40,000 range, up over 65 percent.
The question that arises now is, are cryptocurrencies back? The short answer is, yes!
Not only is Bitcoin up 65 percent, the second-largest coin, Ether is up 80 percent. The Nasdaq Crypto index itself is up 70 percent right now. All this is quite notable given the fact that broader assets like equities, commodities etc., have mostly been range-bound during this period.
Enough about Bitcoin and Ether though, altcoins have done even better. Altcoins are alternative cryptocurrencies to Bitcoin. Take for example Dogecoin. Dogecoin, a meme coin, is up 450 percent after the sell-off in June.
Solana and Cardano have jumped 283 and 151 percent respectively, hitting new all-time highs in the process. All these cryptocurrencies are some of the most valuable coins in terms of market cap. Others altcoins that underwent the selloff have rallied too, strongly at that.
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So, what is going on?
Well, the 2021 crypto crash was driven by dislocation, which in turn was triggered by investor exuberance and excessive leverage. Some notable developments like signs of regulatory tightening and concerns about Bitcoins energy use further pressured the coins.
Since then, however, both leverage and sentiment have normalised. There has been continued adoption of cryptos by investors and entities, increased product offerings and the fears of excessive regulatory crackdowns around the world have also receded.
What the accompanying video of CNBC-TV18’s Prashant Nair for more details.