(Bloomberg) —

A lull in Bitcoin’s wild swings in recent days has been taken by some as a tentative sign the fragile digital currency could recover.

The world’s largest cryptocurrency rose as much as 3.3% Tuesday, its third straight day of gains. Swings in the price — as measured by the spread between its daily high and low — fell to their lowest since the beginning of the year, despite reports over the weekend that U.S. financial authorities are preparing to take a more active role in regulating the crypto market. Bitcoin’s 10-day volatility fell back to 106% from a high of nearly 162% on May 24.

“Despite another set of ‘negative headlines’ Bitcoin actually rose $2,000 over the weekend,” wrote Tom Lee, co-founder of independent research firm Fundstrat Global Advisors LLC in a note to clients. “I can’t help but view this as reinforcing the likelihood Bitcoin has bottomed, given bad news is not creating new lows.”

Lee sees Bitcoin exceeding $125,000 before the end of the year, but is watching for a rise above $40,000 as a sign the digital currency has seen its lows for 2021.

Bitcoin Slump

Cryptocurrencies have experienced a torrid few months, with Bitcoin at one stage more than halving from its mid-April high on concerns about regulation from the likes of the U.S. and China and questions about the toll of its energy requirements on the environment. Prominent digital currency advocate and Tesla Inc. founder Elon Musk even went as far as to stop accepting Bitcoin as payment for vehicles.

“Crypto is a tough gig right now, the tape is messy, and Bitcoin could easily break hard one way or the other,” Chris Weston, head of research at Pepperstone Financial Pty, wrote in a note.

On Thursday, Bank of Japan Governor Haruhiko Kuroda joined the chorus of central bankers casting doubt on Bitcoin following its latest surge and slide.

Still, some see the weekend’s relative calm as a sign that prices could recover, even as Bitcoin’s questionable environmental profile has eroded the argument that the token is bound to lure more mainstream investment. It has risen about 20% from its May low just above the $30,000 level.

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“As regulators engage there may be some unnerving headlines for the market, but engagement is a medium term positive for institutional adoption,” said Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX. “There are some tentatively positive signs at least that the worst fears haven’t become a reality.”

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