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Bitcoin rose as a lot as 18% after a wild day that noticed the cryptocurrency briefly drop under $ 30,000

The reflection of bitcoins in a computer hard drive.

Thomas Trutschel | Photo library via Getty Images

Bitcoin continued to rally from its annual lows on Wednesday.

The cryptocurrency sank below the all-important $ 30,000 threshold on Tuesday and at some point briefly wiped out all of its 2021 profits. It later recovered to be positive for the day.

On Wednesday, Bitcoin rose 18%, according to Coin Metrics data, and climbed back above the $ 34,000 mark in early morning trading. Most recently it changed hands at $ 33,641.27, up 3% from the day.

Smaller rivals rose as well, with Ether rising 6% to $ 2,014 and XRP rising 9% at a price of 64 cents. The reason for the upward movement wasn't clear, but cryptocurrencies are known for their volatility.

Bitcoin had a solid start to the year, hitting an all-time high of nearly $ 65,000 before the blockbuster debut of the Coinbase crypto exchange, and institutional investors seemed to be warming to it.

But the world's largest digital coin has been on a roller coaster ride since then and has almost halved in the face of a string of negative news.

In China, authorities have restricted bitcoin mining, the energy-intensive process used to validate transactions and generate new bitcoins. At the weekend, Beijing's crackdown on crypto mining extended to the hydropower-rich province of Sichuan.

Then the People & # 39; s Bank of China announced on Monday that it had urged financial institutions like Alipay and large banks not to offer services related to cryptocurrency activities.

Investors are also increasingly concerned about Bitcoin's environmental impact after Tesla CEO Elon Musk decided to stop accepting Bitcoin as a means of payment on his company's vehicles.

At the time, Musk said he was concerned about Bitcoin's huge energy consumption and the "rapidly increasing use of fossil fuels" in mining the digital asset. However, he later said Tesla would accept Bitcoin if it is confirmed that at least half of Bitcoin mining is powered by clean energy.

Critics of the cryptocurrency have long been wary of its environmental impact. This could jeopardize the adoption of Bitcoin by institutional investors, who are under increasing pressure to invest in cleaner, more ethical assets.

In the meantime, there were also concerns about tether, a so-called stablecoin, the price of which is said to be pegged to the US dollar.

Tether is now the third largest digital currency in the world with a market value of more than $ 60 billion. However, some investors are concerned that Tether's issuer does not have enough dollar reserves to justify its peg to the greenback.

Last month, the company behind Tether broke the reserves for its stablecoin, revealing that around 76% was covered by cash and cash equivalents – but just under 4% of that was real cash while about 65% was commercial paper, a form of short-term debt.

It comes after the New York attorney general reaches an agreement with Tether and Bitfinex, an affiliated digital currency exchange. The state's top law enforcement officer had charged the companies with moving hundreds of millions of dollars to cover the loss of $ 850 million in mixed customer and corporate funds. Tether and Bitfinex agreed to pay $ 18.5 million in settlement and were banned from operating in New York state, but the companies did not admit any wrongdoing.

– CNBC's Tanaya Macheel contributed to the coverage.

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