Bitcoin has held up relatively well this week despite negative headlines about regulatory crackdowns.
For analysts with a long-term view, that price action fits with their thesis that increased scrutiny will shake out the bad actors and make the markets healthy enough for institutions to invest.
"In the long run this is WILDLY bullish," Brian Kelly, a CNBC contributor and head of BKCM, said in a note to clients Thursday. "If the DoJ and CFTC feel as though they have 'cleaned' up the market, then it paves the way for a U.S. Physically backed Bitcoin ETF, and brings in institutional investors."
Bitcoin briefly hit a six-week low of $7,272 on Thursday morning after Bloomberg reported the U.S. Department of Justice opened a criminal probe into whether traders are manipulating the price of cryptocurrencies. The report, citing sources, said the Commodity Futures Trading Commission was assisting in the investigation.
However, bitcoin soon recovered its losses for the day and was trading near $7,570 in the afternoon, down just 8 percent since Friday. The CFTC, which oversees bitcoin futures, declined to comment, as did the Justice Department.
"I have not seen any evidence of price manipulation in bitcoin markets, but am certainly in favor of increased oversight, as it can only help to instill further confidence in the crypto markets," said Joe DiPasquale, founder and CEO of BitBull Capital, a cryptofund that invests in other cryptofunds.
Other negative news could have hit bitcoin's price harder this week, but did not.
On Monday, the North American Securities Administrators Association announced that an "Operation Cryptosweep" crackdown on cryptocurrency-related fraud has resulted in nearly 70 inquiries and investigations nationwide since the beginning of this month. Thirty-five enforcement actions are pending or completed.
"These actions signal that 'adult supervision' is coming to crypto and adding such oversight incrementally improves the structural integrity and legitimacy for the crypto-currency investor," Fundstrat's Tom Lee said in a Thursday report. Lee maintained his midyear price target of $20,000 on bitcoin and a year-end forecast of $25,000.
That said, it may take longer for the cryptocurrency market to recover from the regulatory uncertainty that has contributed to bitcoin's more than 50 percent plunge at the start of this year.
Lee had predicted bitcoin would get a boost last week from Consensus and other cryptocurrency conferences during New York City's "Blockchain Week."
But the regulatory overhang persisted. On the Friday heading into the week of conferences, bitcoin fell to its lowest since April 20, a three-week low, after news prosecutors raided the largest cryptocurrency exchange in South Korea.
"The crypto market is still in its infancy — we are in the stone ages comparatively — and very sensitive to news and manipulation," said Matthew Roszak, co-founder of blockchain company Bloq and chairman of the Chamber of Digital Commerce.
"As the market matures with better infrastructure (exchanges, futures, etc.) along with increased participation from global institutional investors," he said, "the market will get past these growing pains."