The price of bitcoin shot up by more than $4,000 overnight to recuperate losses suffered last week.
The cryptocurrency reached above $58,000 to close within $10,000 of the all-time high it reached earlier this month.
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The 7 per cent price rise was mirrored by several other leading cryptocurrencies, including Ethereum (ether) and Solana (SOL).
The overall crypto market rose more than 5 per cent to return above $2.5 trillion.
The bounce back could signal an end to the price correction BTC suffered after its record high, which blockchain data suggests was partly caused by long-term investors skimming profits from their holdings.
Concerns surrounding potential new cryptocurrency regulations introduced with the US infrastructure bill also contributed to the downturn, as well as fears that creditors of the collapsed crypto exchange Mt Gox could finally liquidate their payments.
The reason for the recovery is not immediately clear but is likely to be similarly multi-faceted.
One of the simplest explanations is that more bullish investors took the opportunity to “buy the dip” in expectation of the price returning to previous levels.
Among them was El Salvador President Nayib Bukele, who said on Friday that the Central American country had acquired “100 extra coins with a discount”.
El Salvador’s treasury now holds more than 1,200 BTC and has plans to use profits to build schools and animal hospitals. President Bukele also recently announced a $1 billion bitcoin bond to help fund the development of “Bitcoin City”.
Private investors also revealed they had acquired more cryptocurrency during the recent dip.
“I bought almost $10m worth of BTC and ETH at the current levels to add to my positions,” Alex Mashinsky, CEO of crypto rewards firm Celsius Network, tweeted shortly before the market surge.
“We may see a retest of $53k for BTC and $4k for ETH but these should be short term bottoms with us going back to $70k from here.”
