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Bitcoin turns positive on day in wild session where it briefly dropped below $30,000

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Bitcoin continued its volatile streak on Tuesday, starting the day with a tumble below the key $30,000 level and then a rally completely back into positive territory. It briefly turned negative for 2021 at one point Tuesday before recovering.

Near its low of the day, bitcoin fell more than 11% to about $28,911, below the $29,026 level where it ended 2020, according to Coin Metrics. The cryptocurrency then bounced and was up 0.43% after 4:00pm EST to $32,637.54 on the session, according to Coin Metrics.

Technical analysts had been watching the $30,000 level as a key support level on the charts after the cryptocurrency had fallen to near that low during its May crash.

Galaxy Digital CEO Mike Novogratz had noted on CNBC's "Squawk Box" Tuesday morning that bitcoin could still rebound after the early decline and if it didn't recover, there was significant downside to the next support level.

"Thirty-thousand, we'll see if it holds on the day. We might plunge below it for a while and close above it. If it's really breached, $25,000 is the next big level of support," Novogratz said. "Listen, I'm less happy than I was at $60,000, but I'm not nervous."

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Bitcoin has been struggling to reclaim its highs from earlier in the quarter. It fell dramatically in May following some market-moving tweets by Elon Musk about bitcoin-related environmental concerns, and then even further in early June around fears of the cryptocurrency's use in the Colonial Pipeline ransomware attack.

It's been on a roller-coaster ride since then, battered by a stream of headlines out of China, where regulators have imposed new restrictions on energy-intensive mining and ordered financial institutions like Alipay to stop doing business with crypto companies. The price briefly touched $40,000 last week and fell again Monday.

With Tuesday's losses, bitcoin has been cut in half from its all-time high of more than $64,000 in mid-April, taking other cryptocurrencies along with it. Ether fell 5.6% and dogecoin dropped 12%.

Significant pullbacks have happened before in the cryptocurrency market, with bitcoin falling about 80% from its late 2017 highs at one point. Professional crypto investors have warned that the space should continue to be volatile in the years ahead.

"The only guarantee with the cryptocurrency space is volatility, and obviously that's what we have right now," Fairlead Strategies founder Katie Stockton told CNBC. "It's not new, we've had days like this before, it's just a matter of navigating through this noise."

Crypto investment product providers, such as CoinShares, Grayscale and Bitwise, are experiencing their sixth consecutive weeks of outflows, though some providers are seeing inflows, according to CoinShares. Bearish sentiment is more focused on bitcoin, with outflows for the week totaling $89 million and totaling $487 million for the year, or 1.6% of assets under management. Ether outflows, by contrast, are at $1.9 million for the week and $14.6 million for the year, or 0.14% of AUM.

Novogratz also noted that despite previous pullbacks, crypto market infrastructure is only becoming more mature, which has helped usher in more institutional support over the past year, with major hedge fund managers, pension funds and banks jumping into crypto, while registered investment advisors seek ways to get clients exposure to cryptocurrencies in ways that are compatible with their current workflow and wait for custody banks to introduce crypto services.

The price of bitcoin rose nearly 500% between mid-September and its April peak. Even with the recent decline, the cryptocurrency is still up more than 200% over the past 12 months.