Bitcoin, ethereum rise as cryptos recover after sell-off

·3 min read
Bitcoin and ethereum value rose on Wednesday morning. Photo: Yuriko Nakao/Getty Images
Bitcoin and ethereum value rose on Wednesday morning. Photo: Yuriko Nakao/Getty Images

Cryptocurrencies were broadly higher on Wednesday, recovering some of the losses made on Tuesday.

Ethereum (ETH-USD) hit a record high, at one point trading at $4,360 and breaking the $500bn market cap for the first time.

At the time of writing it was up 4.7%, trading at $4,250. It had crossed the $4,000 mark over the weekend, but then slumped earlier this week, along with other cryptos, amid a sell-off. 

Bitcoin (BTC-USD) was up about 2.5%, trading at $57,173.86.

“Ethereum's minor retracement seems to be over again as the second biggest coin by market cap has made a new all-time today and the price continues to move higher,” said Naeem Aslam, chief market analyst at Ava Trade.

Ethereum was up on Wednesday morning. Chart: Yahoo Finance
Ethereum was up on Wednesday morning. Chart: Yahoo Finance

Ethereum's market cap makes it bigger than Visa (V) and JPMorgan (JPM).

"There's no clearer sign that alternative currencies have cemented their position in the mainstream," said Jason Cozens, CEO of fintech Glint.

"Throughout the ongoing surge towards alternatives, consumers have made it clear that the incumbent system is no longer fit for purpose as they search for more value and control over how they spend and save their money."

Meanwhile Dogecoin (DOGE-USD) was up 11%, trading at $ 0.5185. It had also fallen on Tuesday, but then pared its losses as Tesla (TSLA) CEO Elon Musk asked Twitter users if they would like to be able to buy the company’s products with the joke token.

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Some 3.9 million people had voted as the poll came to a close, with roughly 78% saying "yes".

“Looking at the recent poll survey on Elon Musk's tweet, it seems like consumers will be able to buy Tesla by using dogecoin,” said Aslam.

“The massive rally in dogecoin that we have seen in the past few weeks has triggered a significant rally in other meme coins. We continue to see traders favour those coins which are under one dollar."

Read more: FTSE 100 outperforms as UK GDP points to turnaround

“For bitcoin, the challenge remains the same, and that is if the crypto king is going to come out of its ugly consolidation zone,” said Aslam.

He said the US Securities and Exchange Commission (SEC) had “fired new fresh warnings” about the lack of regulations when it comes to bitcoin, which means investing in the crypto could be risky.

On Tuesday, the SEC said investor interested in investing in a mutual fund with exposure to the bitcoin futures market should "carefully consider the risk disclosure of the fund, the investor’s own risk tolerance, and the possibility, as with all investing, of investor loss."

It said that investors should understand that bitcoin, including gaining exposure through the bitcoin futures market, is a "highly speculative investment."

"The crypto crackdown has already begun - some financial institutions have placed severe restrictions on clients accepting cryptos or investing in companies that do, regulators and central banks have issued dire warnings that investors could lose everything and US Treasury Secretary Janet Yellen has been vocal in her criticism of bitcoin and it's use for criminal activity," said Glint.

Earlier, Simon Peters, cryptoasset analyst at multi-asset investment platform eToro, had told Yahoo Finance: “The sell-off is simply down to normal market dynamics. Inevitably when coins reach all-time highs, as ethereum has this week, there will be some investors that sell and crystalise profits.”

“Longer-term, the dynamics for many cryptoassets remain solid, with new investor groups – such as institutions – keen to get involved, favourable supply/demand dynamics, and a desire to diversify some wealth away from traditional investments.”

Watch: What are the risks of investing in cryptocurrency?