Bitcoin drops below $40,000, almost wiping out gains from Biden’s crypto executive order

Bitcoin and other cryptocurrencies fell on Thursday as some of the initial enthusiasm around US President Joe Biden's executive order on digital assets faded.

Bitcoin last fell more than 5% to $39,637.11, according to Coin Metrics.

On Wednesday, bitcoin rose up to $42,577 after starting the day trading at around $38,744.

Other cryptocurrencies like ether and XRP They were also trading down.

“There are multiple factors at play right now. The stock market in general is down, reacting to macro level events. And those same macro level events are also generally driving crypto markets down because many people still see the cryptocurrencies as an investment vehicle," said Sara Xi, chief product officer at Prime Trust.

"Crypto is more than an investment vehicle," he added. "It's a store of value, it's a currency. Those factors sometimes counteract each other and drive up the price, [but] today, events at the macro level (the price of oil, the situation in Russia and the Ukraine) dominate everything."

Wednesday's spike came as optimism around Biden's executive order on cryptocurrencies increased. The order focuses on six key areas: consumer protection, financial stability, illicit activity, US competitiveness in the industry, financial inclusion, and responsible innovation.

Some high-profile cryptocurrency industry players praised the US government move. Cameron Winklevoss, co-founder of cryptocurrency exchange Gemini, called it a “watershed moment.”

But not everyone was convinced.

"The executive order is, more than anything, defensive. The main goals of the EO are to protect the financial position of the US globally, to make sure that US regulations (both federal and global) don't circumvent using crypto, make sure investors and users are legally protected, and that crypto as an industry is generally regulated," said Guy Gotslak, co-founder of crypto investment platform My Digital Money.

"These are not bad; we all want the same thing. We want to protect investors, especially small ones. But the EO does not mandate the government to take proactive steps to encourage the growth of the technology."

While the order was seen as a positive by most in the industry, was not the main price driver as bitcoin bounced on Wednesday or when it reversed course on Thursday.

Vijay Ayyar, vice president of corporate and international development at crypto exchange Luno, said the executive order was "overall more positive or neutral."

"Therefore, although the market reacted positively to the statement, the momentum was not strong enough to break through the resistance" at $42,000, he said.

"What we can see is that Bitcoin is limited in a wide range, unable to make a strong move on either side, coupled with the ongoing uncertainty over Ukraine," Ayyar added.

— CNBC's Tanaya Macheel contributed reporting.