Bitcoin bounces $700 in less than three hours, capping wild weekend that brought it below $7,400

Key Points
  • Bitcoin dropped nearly 7 percent toward $7,000 Sunday following reports that Twitter will follow Google and Facebook's lead in banning cryptocurrency ads.
  • It then recovered, rallying $700 in less than three hours Sunday evening.
  • Twitter is reportedly preparing to ban advertising for cryptocurrencies, according to Sky News.
  • The reported move would follow similar bans from tech giants Google and Facebook.
Bitcoin bounces back once again
Bitcoin bounces back once again

Bitcoin prices were back above $8,500 Monday after a wild weekend that saw the digital currency plunge near the $7,000 level, then rise $700 in less than three hours.

Prices are still off by 10 percent in the last seven days, according to CoinDesk.

Source: CoinDesk

The cryptocurrency hit a low of $7,335.57 earlier Sunday before recovering back above $8,000, according to CoinDesk. Bitcoin was trading near $8,585 as of 12:30 p.m. ET Monday.

Traders were unsure of what was behind the late comeback, but blamed another possible bitcoin advertising ban for the weakness over the weekend. Twitter is reportedly preparing to ban advertising for initial coin offerings, token sales, and cryptocurrency wallets globally, according to Sky News. The new policy could roll out in two weeks, the report said.

The move would echo other tech giants' restrictions on advertising, and efforts to crack down on cryptocurrency frauds.

Google announced an update to its financial services policy last week that will restrict advertising for "cryptocurrencies and related content" as of June.

Facebook, the world's second-largest online ad provider, said in January it would ban all ads that promote cryptocurrencies to prevent the spread of what it called "financial products and services frequently associated with misleading or deceptive promotional practices."

"Facebook was previous, but now Twitter is also rumored," said Joe DiPasquale, CEO of BitBull Capital. "Much of crypto demand is retail, so this may negatively impact demand."

Twitter declined to comment.

DiPasquale also pointed to the high price of mining affecting bitcoin's drop. Bitcoin miners use software to solve math problems and are given bitcoins in exchange. That now costs around $8,000 per bitcoin, he said.

"Now that it's dropped below that, there's less incentive for miners to continue to keep machines on unless they are in a lower-cost energy area or have a way of producing at less than cost," DiPasquale said.

Regulatory concern has also dampened bitcoin prices in the past weeks.

Bitcoin began its fall from $11,000 in two weeks ago following a statement by the SEC that expanded its scrutiny to cryptocurrency exchanges, and news of compromised accounts on a major Hong Kong-based exchange Binance.

Bitcoin's one-week performance

Source: CoinDesk

G-20 finance ministers and central bank governors are set to meet in Buenos Aires, Argentina, beginning Monday. Cryptocurrency and bitcoin discussions will happen in a closed door session on Tuesday, a spokesperson from the G-20 told CNBC, and may be discussed at a subsequent press conference.

The Financial Stability Board (FSB), a global watchdog for G-20 economies, responded to calls from some countries to crack down on digital currencies in a letter to members Sunday.

"The FSB's initial assessment is that crypto-assets do not pose risks to global financial stability at this time," Chair of the Financial Stability Board Mark Carney said in the letter.

Carney, who is also governor of the Bank of England, pointed to the size of crypto assets relative to the rest of the global financial system.

"Even at their recent peak, their combined global market value was less than 1 percent of global GDP," Carney said in the letter.

Other cryptocurrencies struggled Sunday. Ethereum fell nearly 17 percent from Sunday's open, hitting a low of $460.09, according to data from CoinDesk. Bitcoin cash and litecoin both dropped roughly 10 percent from the open, according to Coindesk. Ripple meanwhile fell 14 percent to 55 cents Sunday.

Spencer Bogart, partner at Blockchain Capital, highlighted the potential for a liquidity crunch as a reason for the sell-off in "alt-coins," or cryptocurrencies other than bitcoin.

"The more speculative coins are being hit particularly hard," Bogart said. "Liquidity is among their primary features and many of the holders lack long-term conviction, therefore they're rotating into larger coins with stronger long-term prospects (e.g. Bitcoin)."