Bitcoin tops $40,000 as cryptocurrency rallies after sell-off

Bitcoin tops $40,000 as cryptocurrency rallies after sell-off

Bitcoin surged above $40,000 on Monday as sentiment turned bullish following a recent sell-off.

The cryptocurrency traded at around $40,417 by 3:23 p.m. ET, according to CoinDesk data, up roughly 17% in the last 24 hours. Bitcoin's rally lifted other cryptocurrencies with ether up 11.9% at about $2,424.

The rally comes after bitcoin recently fell below $30,000 after a global sell-off in stocks, sparking fears that it could plunge even further.

Musk, Dorsey, Wood in focus

Twitter CEO Jack Dorsey, Tesla CEO Elon Musk and ARK Invest CEO Cathie Wood all recently spoke during a closely watched bitcoin conference called "The B-Word."

Musk said that Tesla would likely start accepting bitcoin for vehicle purchases again as a greater share of bitcoin mining switches to renewable energy. In May, Tesla suspended vehicle purchases using the cryptocurrency out of concern over the "rapidly increasing use of fossil fuels for bitcoin mining."

Bitcoin mining is the energy-intensive process of creating new coins, which involves solving complex math problems. The computational power required to do so also consumes a lot of energy.

"The Chinese trading day has opened up, and the Elon/Jack/Cathie talk was super bullish," said Alex Brammer of Luxor Mining, a cryptocurrency pool built for advanced miners.

There have been other bullish headlines for bitcoin. E-commerce giant Amazon is looking to add a digital currency and blockchain expert to its payments team, suggesting it could be taking a closer look at bitcoin and other cryptocurrencies. An Amazon spokesperson said that the company is "inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon."

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These bullish moves have also contributed to a so-called "short squeeze," according to bitcoin mining engineer Brandon Arvanaghi.

Investors who short bitcoin are betting that the price will fall further. But if the price goes higher, these investors look to cut losses and exit their short positions, which helps to push the price even higher.

"I think the extent of the jump was probably driven by over-leverage shorts," Vijay Ayyar, head of business development at cryptocurrency exchange Luno, said.

Meanwhile, some of the issues that have weighed on bitcoin's price have begun to clear up. Over the past few months, China has renewed its crackdown on cryptocurrencies targeting mining and trading. And concerns over the carbon footprint of bitcoin mining are starting to wane.

Luxor Mining's Brammer said the uncertainty around the environmental impact of mining and the Chinese regulatory concerns have "worn off."

—CNBC's Hannah Miao and Gina Francolla contributed reporting.