Bitcoin is famous for its quick upward spike and downward crash since its inception. Bitcoin has experienced many sudden moves in the past; from spiking upwards more than 20 percent to declining more than 40 to 50 percent in a single day. And as always other cryptocurrencies follow the moves of bitcoin. However, the current price increase that occurred on the 2nd of April might seem a little different.
There is absolutely no news such as a large scale adoption, approval of Bitcoin ETF, the launch of Bakkt or anything like that which could lead to a large number of people entering into the market and drive the price upwards. Also, rumors suggest that a single trader was behind the sudden price rally as he bought more than 20,000 BTC through three different exchanges using trading bots after reading an April fool’s day article posted on some cryptocurrency news website which said that two bitcoin ETFs have been approved by the US SEC.
While some analysts have started to believe that the bear market has finally come to an end and the bulls are back to action and bitcoin will soon reach to $6000 mark, other major analysts are cautioning investors about the risk of trading in such a situation. Recently, Bloomberg posted an article which said that the sudden price surge is a blip and investors should just ignore it.
Bitcoin crashed to near $3100 in December last year after which it started to correct upwards. However, the major correction started in February this year which the price of BTC was around $3350 and corrected to around $3900. At the end of March, the price touched the $4100 mark reaching up to $4150. The total increase in the two months (February and March) was around $800 in total. However, on 2nd April, bitcoin spiked up from around $4100 to $5100 which is a massive $1000 increase in just 24 hours which is $200 more than the price increase in the two months (March and April) combined.
If the rumors about the single trader reading a piece of fake news and buying 20,000 BTC is correct, it might just have an adverse effect on the overall market as the trader might just sell the same amount of BTC after knowing the truth about the April Fool’s day article. The sudden price increase created a feeling of confidence amongst most cryptocurrency enthusiasts as their thoughts suddenly turned bullish and everyone started to buy which even spiked the price up to $5350 yesterday (Bitmex).
The market is always run by two kinds of traders; one who is bearish and is willing to sell and one who is bullish and willing to buy. If everyone turns bullish, no one will be willing to sell their bitcoin and there will be no selling orders in the market. Large institutions take advantage of such a situation (like the current) where most of the people who were earlier selling their BTC at $4000 mark have now turned bullish and are willing to buy even at a high price such like $5300. At such a situation a large institution who has tons of BTC stored in their cold wallets find the best suitable time to sell all their holdings at once and the market crashes before anyone even understands what just happened and the small traders are left with nothing but losses.
The cryptocurrency market is highly volatile and is run mostly due to the emotions of the traders and enthusiasts who believe in the future of bitcoin. The increase of price when there is massive adoption, regulation or launch of a large product can be termed as genuine, however, a sudden increase in the price without any reason behind it might be termed as a conspiracy as the person, institution or group of institutions who were behind the sudden surge would surely have a profit earning theory at the back of their mind.
Investors and traders are advised to do their own research and analysis before investing or trading in any digital currencies as the market is highly volatile.
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