Cryptocurrency markets reversed declines from the last couple of days after bullish remarks by the heads of U.S. agencies responsible for regulating markets revived confidence in the markets. 

At a Congressional hearing yesterday, CFTC Chairman Christopher Giancarlo and SEC Chairman Jay Clayton discussed the scope and extent of regulation for cryptocurrencies. While they alluded to the dangers of cryptocurrencies, both men came out sounding mostly positive about the technology. (See also: SEC Chair Testifies About Cryptocurrency Regulation Before Congress.) 

This is good news after governments in South Korea and China threatened to impose further regulation on digital currencies. South Korea is the third-largest trading venue for cryptocurrencies after the United States and Chinese miners are responsible for mining approximately two-thirds of all bitcoin in existence currently.    

Bitcoin, which reached a low of $5,873 yesterday morning, shot up by more than $2,000 after the hearing. At 14:03 UTC, it was trading at $8,307.76, up 7.89% from its price 24 hours ago. The rise in its price was accompanied by an increase in its trading volume, which had declined after its price crashed. 

Other cryptocurrencies also witnessed double-digit increases. Among the top 10 most-traded cryptocurrencies, Chinese coin NEO led the gains, rising by 31% from its price 24 hours ago to $113. The percentage figure still represented a retreat from a high of $118 earlier this morning. 

On an overall basis, cryptocurrency markets gained 20% in the last 24 hours and had a total valuation of $395 billion at 14:21 UTC. While those figures are impressive, the markets are still way off their highs a month ago, when cresting valuations of alt coins helped them breach the $800 billion mark. (See also: Steve Wozniak Sold All His Bitcoin: Bought It At $700.)

Better Things To Come? 

Cryptocurrency bulls are back in action, thanks to a revival in cryptocurrency markets. Thomas Glucksman, head of APAC business development at Gatecoin, told CNBC that cryptocurrency prices will reach new highs this year due to three factors: increased regulatory recognition of exchanges, flow of institutional capital, and major technology developments, such as the Lightning Network.

Glucksman has predicted a price target of $50,000 for bitcoin by December 2018. Jamie Burke, CEO of Outlier Ventures, a venture firm that invests in decentralized technologies, predicted a bull run for the market in February that is “comparative, if not greater than last year.” In number terms, this means a trillion-dollar valuation for cryptocurrency markets. But that will be followed by a “proper crypto winter,” during which realistic valuations and fundamentals will take center stage. 

These assessments are considerably more bullish as compared to those made by other analysts. For example, Tom Lee of Fundstrat Global Advisors has set a price target of $20,000 for bitcoin by mid-year and $25,000 by the end of this year.

Lee has also forecast a $1.2 trillion valuation target for it earlier. (See also: Bitcoin Total Value To Hit $1.2 T In 2018.) The bullish assessments are presumably based on traction for cryptocurrencies among users (including banks and businesses) and investors.     

Are Cryptocurrency Markets Predictors Of Equity Movement? 

Is there a correlation between cryptocurrency markets and equity markets? Both crashed within days of each other recently and it would be tempting to conclude that crypto markets are precursors for equity market movement. Analysts at Morgan Stanley spoke to investors regarding this. 

“The idea is that as institutional investors seek out increasingly higher level of risk/return, that Bitcoin may represent the most risk/potentially highest return available, and hence could be evolving quickly into a primary barometer,” they wrote. “And our conversations with investors certainly give weight to that view.”

But Bloomberg writers found that the correlation of cryptocurrency markets with equity markets has stayed below 0.4 for the most part. The correlation increased in late-2017 as both markets surged. 

Bitcoin Miners Heave A Sigh Of Relief 

A lesser-visible constituency that might be relieved with the resurgence of cryptocurrencies are miners. As bitcoin’s price crept downward, it ate into their profit margins. Previous reports had indicated that $3,900 was the cryptocurrency’s breakeven price for miners in China, a country that is home to the vast majority of mining operations.

A Bloomberg story yesterday stated that only “the industry’s most efficient operator” would survive the current tumble in bitcoin’s prices. Specifically, only miners who can produce bitcoin at electricity rates of about 6 cents per kWh can stay profitable between the $6,000 to $8,000 price mark for bitcoin. 

Supply is a critical aspect of any currency’s supply. The supply of bitcoins is expected to slow down in the future as problems used in its algorithm become harder. According to, the number of bitcoins in circulation has increased only 0.3% in the last month. Therefore, a decline in the bitcoin supply would probably have had a minimal impact on its price. 

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.

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