By Samuel Indyk
Investing.com – After what has been a volatile week for cryptocurrencies, Bitcoin remains anchored around $40,000 as traders await the next catalyst for a move higher or lower.
The meltdown earlier in the week saw Bitcoin crash as low as $30,000 before finding key support ahead of that level and has since rebounded 30% from that level. Nevertheless, the largest cryptocurrency by market cap still trades over 35% from its all time high above $63,000 that was hit in April.
Despite the rebound off the lows, sentiment has clearly shifted in the latest week, beginning from Elon Musk’s intervention that Tesla (NASDAQ:TSLA) would stop accepting Bitcoin as payment for cars. Some took this news as a view that the corporate acceptance of Bitcoin and digital assets still has a long way to go.
Musk’s sudden change of view on Bitcoin was due to the environmental impact of mining and transacting Bitcoin, something that is at odds with his electric vehicle company’s vision for a cleaner future.
“We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions,” Musk said on Twitter.
Further weighing on the price was fears of a regulatory crackdown from China to the US. China’s ban on banks and payment firms from providing crypto transaction services was cited as one of the main reasons for Wednesday’s sell off.
Late on Thursday, the US Treasury Department announced that it would require any transfer of cryptocurrency worth $10,000 or more to be reported to the IRS, the first sign that the US is considering clamping down on cryptocurrency markets.
“Cryptocurrency already poses a significant detection problem by facilitating illegal activity broadly including tax evasion,” the Treasury Department said.
However, despite the spate of bad news for cryptocurrencies, some analysts have suggested dip buyers may continue to keep the price elevated.
“The direction of travel is though far from clear, as some crypto fans may see the recent falls as an opportunity to buy into currencies like Bitcoin at a cheaper price,” said Hargreaves Lansdown (LON:HRGV) senior investment and markets analyst Susannah Streeter.
However, Streeter cautions that traders should be wary when venturing into cryptocurrency trading.
“Given the huge volatility and that the use case of crypto currencies is far from proven, traders should only dabble with money they can afford to lose,” Streeter added.
At 10:30BST, Bitcoin was trading at around $40,600, up around 2.1% in the last 24 hours but down around 20% over the last seven days. Some analysts are noting that the 200 day moving average is becoming a key level, which currently sits around $40,080. A firm break in either direction could dictate the state of things to come in the near term.