But its outlook remained tilted to the downside, analysts
said.
The world's largest cryptocurrency dropped to US$28,600, its
lowest since early January. It was last up 3.7 per cent at US$32,802, and
remains about 13 per cent higher so far this year.
Bitcoin's earlier fall also pressured smaller coins such as
ether.
It tumbled 11 per cent on Monday, its largest one-day drop
in over a month, with losses of roughly 56 per cent since hitting an all-time
high of just under US$65,000 in mid-April.
The earlier sell-off was sparked by the People's Bank of
China urging China's largest banks and payment firms to crack down harder on
cryptocurrency trading, the latest tightening of restrictions on the sector by
Beijing.
"The underlying fundamentals of the crypto-asset world
have not changed and this correction was more of a when, not if,"said
Iqbal Gandham, vice president of transactions at Ledger, a digital asset
management solution.
"Any asset class which sees a meteoric rise in the same
way as we have seen in crypto is expected to correct. The situation in China
has perhaps exacerbated this, along with the increased rate of adoption of
altcoins by new users, following tweets of various crypto personalities."
Bitcoin's chart outlook has darkened after it broke below
the neckline of a massive head-and-shoulders top formation at US$30,393,
bringing closer a test of key chart support that could potentially wipe roughly
40 per cent off its current value.
After Monday's PBOC statement, banks including Agricultural
Bank of China and Ant Group's payment platform Alipay said they would step up
monitoring to root out crypto transactions.
Ether, the token used for the Ethereum blockchain and the
second-largest cryptocurrency, last traded up 0.8 per cent at US$1,900. It
earlier dropped to US$1,700, its lowest in a month.
It broke through key structural support in a sign that longs
could be capitulating as China's crackdown rippled through the cryptocurrency
universe.
HASH RATE TUMBLES
Evidence of the impact of the mining curbs is emerging. The
so-called hash rate of the bitcoin network - a measure of its processing power
that shows how much mining is taking place, on Monday hit its lowest level
since late 2020.
Authorities in major bitcoin mining hubs including Sichuan,
Xinjiang, and Inner Mongolia have issued their own curbs with greater details
on the restrictions.
Iran in late May also banned the energy-intensive mining of
cryptocurrencies like bitcoin for nearly four months, as the country faces
major power blackouts in many cities.
On Tuesday, state media reported that police have seized
7,000 computer miners at an illegal crypto farm, their largest haul to date of
the energy-guzzling machines.
The crackdown on miners will likely hit prices in the
short-term, market players said.
Mike Novogratz, founder and chief executive officer at
Galaxy Digital, a crypto-focused financial services firm, and one of the
largest crypto investors, told CNBC on Tuesday that China's actions has created
"a retail deleveraging."
"A lot of crypto happens in Asia, a lot of it is
Chinese focused. So we're seeing big liquidations, so it's hard to call a
bottom."
Three industry associations in China last month issued a similar
ban on crypto-related financial services, though market players said it would
be hard to enforce as banks and payment firms could struggle to identify
crypto-related payments.
Beijing's targets are crypto miners, but China's State
Council, or cabinet, said last month it would tighten restrictions on producers
as well as traders of bitcoin. -Reuters