Bitcoin cryptocurrency briefly dropped below $40,000 for the first time since August on Wednesday but then bounced back.
The currency has lost value in recent days after increasing criticism from regulators. However, positive sentiment in global markets meant that the dip below $40,000 was short-lived.
Fears of the impact of a possible default by Chinese property developer Evergrande put pressure on the financial markets in recent days. The expectation that the US Federal Reserve will reduce its crisis support also played a role in stock market sentiment. Bitcoin was also not immune to the sell-off in the traditional markets.
Cryptos are increasingly moving along with the sentiment in the regulated markets, as regulators keep a close eye on the tokens. For example, in a discussion on digital currencies held Tuesday, the chairman of the US stock exchange watchdog SEC said previous initiatives by banks and other companies offering alternative forms of money had failed.
Furthermore, US regulations give the SEC greater control over cryptos, it was emphasized. The SEC chairman also said there are some “gaps” in digital currency oversight that Congress could help plug, such as regulating crypto exchanges.
The US regulator Office of the Comptroller of the Currency, in turn, stated that cryptos and another blockchain-based financing could pose a threat to the financial system. But, again, a comparison was made with how certain derivatives, complex financial products intended to hedge interest rate risks, caused significant problems more than 10 years ago.