Followers of the cryptocurrency Bitcoin (CRYPTO: BTC), or any other crypto coin, would be well used to volatility by now. Cryptocurrencies have now long had a reputation for being some of the most volatile assets available to retail investors.
To illustrate, let's take the benchmark index for the Australian share market, the S&P/ASX 200 Index (ASX: XJO). Over 2021 so far, the ASX 200 is currently up 12.9%. Year to date, the ASX 200 has moved around somewhat, but has never dropped more than around 3% from a year-to-date high as of yet. Let's compare that to Bitcoin. In 2021 so far, Bitcoin is up roughly 47.4%. But it has also fluctuated wildly, falling more than 50% between mid-April and mid-July.
Yowza.
But Bitcoin has also been on a mini-bull run in recent weeks too. In fact, since 20 July, the flagship cryptocurrency has risen from just under US$30,000 a coin to more than US$43,380 today. That's a rise of almost 47% in just 3 weeks.
It's not just Bitcoin either. The second-largest crypto by market capitalisation – Ethereum (CRYPTO: ETH) – has also rallied strongly over the past few weeks. Over the same period, one Ether has risen in value by a whopping 68.7% on current pricing.
So could the crypto bear market we have seen play out over the past few months finally be over?
Well, technically yes, seeing as the prices of these cryptocurrencies have rallied so strongly. So what's behind this recovery?
Image source: Getty Images
What's behind Bitcoin's recovery?
Like 'most things crypto', this rally is hard to put a finger on. But there have been some interesting developments in the crypto world that may be fuelling positive sentiment. The Motley Fool recently discussed the potential emergence of 'Britcoin', a cryptocurrency backed by the Bank of England. Moves like this could continue to lend legitimacy to the cryptocurrency space, and could well be helping to put a floor under Bitcoin's recent losses.
But we could also just be seeing some good old-fashioned bargain hunting going on here. Bitcoin has a famously (or perhaps infamously) loyal army of supporters. Perhaps many of these Bitcoin 'ultra-bulls' have been picking up cryptos like Bitcoin at an elevated rate after its dip below US$30,000 a coin last month. In many cases, investors who 'buy the dip' on Bitcoin and other cryptos in the past have subsequently been rewarded.
Case in point, an investor who picked up $10,000 worth of Bitcoin on 20 July would have close to $15,000 worth of the cryptocurency today. That's not a bad return for 3 weeks of waiting!
