Bitcoin climbs back above US$50,000 after backing from star asset manager

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The price of bitcoin plummeted on Tuesday and took shares of electric car maker Tesla along for the ride. Investors now fret about Tesla's exposure to the cryptocurrency that has seen its value plunge since hitting a record high on Sunday.

HONG KONG (BLOOMBERG) - Bitcoin rallied back above US$50,000 (S$66,000) on Wednesday (Feb 24), aided by supportive comments from Ark Investment Management's Cathie Wood.

The largest cryptocurrency advanced as much as 5.4 per cent to about US$50,557 in Asian trading. The rebound follows a tough week for the token, including a drop to US$45,000 on Tuesday that revived doubts about the durability of a breathtaking and volatile fivefold surge over the past year.

Overall investor sentiment has also been boosted by comments on Tuesday from Federal Reserve chair Jerome Powell, who signaled the central bank is nowhere close to unwinding its easy policy. Cryptocurrencies have been buoyed by a tide of monetary and fiscal stimulus to fight the impact of the pandemic.

Ms Wood, the superstar head of Ark, said in a Bloomberg interview she's "very positive on bitcoin, very happy to see a healthy correction here."

Bitcoin remains lower than its recent record of about US$58,350, but the pullback so far has been "relatively modest," Bespoke Investment Group wrote in a blog post.

The cryptocurrency rally is at the centre of one of the hottest debates in financial markets. Believers see an emerging asset class being embraced by long-term investors, not just speculators. Critics fearbitcoin is in a bubble that will inevitably burst.

Tesla chief executive officer Elon Musk in recent tweets said bitcoin prices "seem high," having earlier called it a "less dumb" version of cash. Microsoft co-founder Bill Gates cautioned about how investors can be swept up in manias. Treasury Secretary Janet Yellen said bitcoin is an "extremely inefficient way of conducting transactions."

Meanwhile, the crypto exchange Bitfinex settled a probe with New York Attorney General Letitia James over allegations that it hid the loss of commingled client and corporate funds and lied about reserves. Some market participants saying that the agreement, which included US$18.5 million in penalties, lifts a cloud over the cryptocurrency market.

"On the grand scale of things, it's less than a speeding ticket," said Antoni Trenchev, managing partner and co-founder of Nexo in London, a crypto lenders. "I'm just excited that they will be revealing more numbers so that we can accurately assess and hopefully that will create some comfort for the market participants."

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