Bitcoin climbs above $40,000

The price of bitcoin (BTC-USD) recovered overnight to return to $40,000 (£28,329), following a sharp sell-off across the market that shook confidence.

Bitcoin dropped as low as $32,000 on Wednesday as selling gripped the cryptocurrency market.

News of a renewed crackdown in China was blamed but prices had been under pressure since Elon Musk said Tesla was abandoning plans to accept bitcoin as payment last week.

The broader crypto market sunk as much as 20% on Wednesday. Data from showed the market was down around 5% over the last 24 hours by 8.15am on Thursday in London.

Genesis, a crypto prime broker and the world’s largest institutional digital currency lender, said the sell-off appeared to be partly driven by forced closures of positions based on leverage.

Trading desks reported cash buyers for ethereum coming into the market as the price fell to the mid-$2,000s and renewed appetite among institutional investors for bitcoin as it reached $35,000.

Bitcoin was up 2.6% to $40,428 by 8.25am in London on Thursday morning.

Ethereum (ETH-USD) was down 6.8% to $2,722 but off the lows seen in mid-afternoon trade on Wednesday when it fell below $2,000. Dogecoin (DOGE-USD), another Musk favourite, was down 8% to $0.37 but also off lows seen in the prior session.

Wednesday’s sell-off once again highlighted the extreme volatility that characterises the cryptocurrency markets.

Unlike with past corrections, analysts said this week’s slump had more consequences for the mainstream financial system and traditional companies.

Several institutions have invested billions of dollars into cryptocurrencies, including Tesla (TSLA) and MicroStrategy (MSTR).

Traditional financial firms like PayPal (PYPL) and Goldman Sachs (GS) have also begun handling the asset on behalf of clients, leaving them with potential exposure.