After months of moving sideways, Bitcoin’s price has suddenly shot upwards, bringing hope to crypto investors that the bull market is back in season. Bloomberg is one of many outlets reporting that Bitcoin briefly topped $5,000, though the highest value recorded within the past 24 hours on CoinMarketCap.com is $4,849. Lack of certainty over the precise size of Bitcoin’s gains is to be expected, as prices typically vary from exchange to exchange. But whatever the precise figure, Bitcoin has experienced it’s biggest single-day surge since crypto’s bear market took hold in early 2018.
CoinDesk notes that Bitcoin blasted through three key resistance levels as it gained 19.17% within 24 hours, rocketing BTC to its highest value since November 22. CoinMarketCap tracks the sudden upward surge as occurring over the space of an hour, with Bitcoin moving from $4,196 at 04:29 UTC on April 2 to $4,849 at 05:29. As usually happens with such price movements, Bitcoin has retraced since then, dipping to $4,637 by 06:44. But it looks as though the massive gains of the past 24 hours will at least be somewhat retained: by 09:29, BTC was back above $4,700, and at time of press it’s at $4,761 and seems to be continuing on the same positive trajectory.
The suddenness of this jump has taken most observers by surprise, though it’s not completely out of step with recent price action. There are have been whispers of a return to a cautious bear market for some time, with CoinDesk reporting just yesterday that Bitcoin’s 10.91% gains during the first quarter of 2020 where its biggest single-quarter gains since the fourth quarter of 2017 – the height of the insane bull run which propelled Bitcoin close to $20,000. That same article posited that Bitcoin would need to sustain levels above $4,236 to truly indicate that the bear market was over. Of course, it’s too soon to say whether the big upswing of the past 24 hours will be sustained, but the uptick completely smashed the article’s predictions that such a breakout may be several months away.
Before getting too carried away with thoughts of a return to a constant upward trajectory, it’s worth considering what may have caused the sudden price movement. Various theories are floating around, including bearish exhaustion, market manipulation, or the fallout from an April Fool’s Day joke. So let’s take a look at each theory in turn and what they have to say about Bitcoin’s outlook.
An April Fool’s Day Joke Taken Too Seriously
Bloomberg picked up on one of the more interesting theories behind Bitcoin’s sudden surge: that an April Fool’s Day joke may have been taken at face value. What Bloomberg describes as “an April Fool’s Day story on a little-known news site” is referring to this article from the Finance Magnate, which claimed that the SEC had approved two Bitcoin ETFs. The article goes on to claim Bitcoin’s price shot up from $4,080 to over $6000. While real-world events haven’t quite seen Bitcoin hit those levels, the article was about 50% right if we take the past 24 hours’ high as $5000.
It’s not really clear how much impact this article had, but it seems unlikely that it achieved enough traction to prompt the sudden price rise. Finance Magnate is therefore unlikely to have caused a spike in Bitcoin’s valuation, but they’ve almost certainly caused a record-breaking spike in their site’s traffic.
The CoinDesk article on Bitcoin’s Q1 2020 gains builds a convincing case for bearish exhaustion over the past few months. Bears were still in clear control of the market throughout January, with BTC shedding another 7.59% of its value over the course of the month. However, the fact that January’s low and high prices were within the previous month’s trading range pointed to “bearish exhaustion.” This trend continued through February, with “a bullish higher low near $3,300 on the weekly chart.” Bitcoin briefly broke $4,100 before falling back to $3,600 in late February, but then continued moving upward to a figure back above $4,100 by the end of March. Along the way, Bitcoin recorded “multiple bullish higher lows along the 30-day moving average.” CoinDesk noted that these price movements were similar to “the bottoming pattern seen before the 2015 bull breakout.”
As we’ve already noted, Bitcoin’s uptick in the past 24 hours has outstripped the article’s predictions of a breakout above December 24’s high of $4,236 not happening “for a few more months.” The bearish exhaustion theory doesn’t quite account for such a dramatic price movement as Bitcoin has just experienced, but it does give hope that the gains will be sustained.
Bloomberg’s piece on the Bitcoin price surge interviews several industry experts and analysts who suggest less encouraging reasons for the recent increase. ANXONE CEO Dave Chapman told Bloomberg that mainstream finance is likely to see such movements negatively, while Kenetic Capital managing partner Jehan Chu said that crypto markets were “emotional” and subject to “waves of enthusiasm,” describing the bullish one-day movement as not being “anything special.” Bloomberg also notes that “big buy orders in Bitcoin can often lead to outsized moves” and “trend-following individual investors and short covering can also exacerbate volatility.”
One prominent crypto commentator implying market manipulation was the @Bitfinexed on Twitter. Bitfinx’ed is known for their highly critical deep-dives into the Bitfinex exchange and its controversial US Dollar Tether stablecoin. In June 2018, two researches from the University of Texas published a widely-shared paper alleging that 50% of Bitcoin’s price rise during the last bull run was attributable to USD Tether. And in November 2018, Bloomberg and others reported that the alleged market manipulation was being investigate by the United States Department of Justice. Bitfinex’ex jumped into to comment early in the price surge, while Bitcoin was up 6% in 15 minutes. They suggested in a series of Tweets that the positive price movement meant “something must have happened to Tether again,” adding that “prices only move like this on bad news” and concluding that “the market doesn’t make a move without fraudulent activity in Tether.” They also responded to an enthusiastic Tweet which pointed out that this is the biggest green candle since December 2017’s bull run by noting that the previous big jump coincided with Tether and Bitfinex receiving CTFC subpoenas.
Given the suddenness and unidirectionality of Bitcoin’s price movement, market manipulation seems a pretty convincing explanation.
New Money Moving into Bitcoin
There are plenty of commentators who’ve made solid arguments for Bitcoin posting huge gains again in the near future in recent days. An April 1 article on Bitcoinist notes that the US Dollar has historically lost over 3% of its value year-on-year, and that Bitcoin has long since massively surpassed parity with the US Dollar. The article argues that as the US Federal Reserve continues to print more US Dollars, its value will continue to fall relative to other assets, meaning a higher US Dollar valuation for Bitcoin. Bitcoinist notes that Bitcoin’s strong performance in Q1 2020 coincides with similarly strong performances for stocks and bonds, as “central banks have pumped almost $1 trillion in liquidity into global markets.” The article goes on to reference a bold claim that central bank quantitative easing will pump Bitcoin to a $100 trillion market cap. With the recent price pump pushing Bitcoin briefly above $13 billion, there’s a long way to go to reach this lofty goal.
— planB (@100trillionUSD) March 31, 2019
Others, such as Digital Currency Group founder and CEO Barry Silbert, have predicted that a number of upcoming Silicon Valley IPOs will pump considerable additional funds into cryptocurrencies, with Bitcoin being one of the main beneficiaries. This may already have happened, with shares in the ride-sharing services Lyft being publicly tradeable since Friday. As reported by The New York Times, Lyft debuted on the stock exchange at $72 a share. After an initial pump, the price quickly fell of, dropping to $69.01 by close of trading on Monday. One beneficiary of the IPO is Andreessen Horowitz, who acquired Lyft shares several years pre-IPO at $4.25 apiece and – as reported by The Block Crypto – is a major investor in cryptocurrencies. This is, of course, not to say that Horowitz had any involvement in Bitcoin’s sudden surge. But the crossover of investors in Silicon Valley start-ups and cryptocurrencies is considerable.
Billions of dollars in private company stock is becoming liquid via IPOs this year. The crypto asset class is going to be a huge beneficiary
— Barry Silbert (@barrysilbert) March 29, 2019
So What Caused the Surge? And Will it be Sustained?
As Bitspark CEO George Harrap told Bloomberg, the reason for Bitcoin’s sudden price movement is “anybody’s guess at the moment.” The sharpness of the increase suggests that market manipulation is a pretty likely explanation, though the fact that Bitcoin’s sudden jump coincided with Lyft’s strong first-day stock exchange performance is another factor worth considering. Added to Bitcoin’s growth over the past 3 months, bulls will be feeling confident that this is a start of a sustained period of growth for cryptocurrency prices.