It seems that yesterday, roughly $10 billion was injected into the cryptocurrency’s market cap in under two hours with industry experts failing to understand what could be responsible for the latest spike and good mood everywhere.
According to Reuters, the latest pump in the price of Bitcoin happened after a mysterious buyer ordered 20000BTC (approx $94.7 million) through major cryptocurrency exchanges, Coinbase, Kraken, and Bitstamp.
Oliver von Landsberg-Sadie, CEO of cryptocurrency firm BCB Group said:
“There has been a single order that has been algorithmically-managed across these three venues, of around 20000BTC . If you look at the volumes on each of those three exchanges – there were in-concert, synchronized, units of volume of around 7,000 BTC in an hour.”
Another industry insider said there were 6 million trades over an hour during the price rise, mostly concentrated on Asia-based exchanges. This is three to four times the usual trading volume. He said:
“You trigger other order books to play catch up, and that creates a buying frenzy.”
Big institutional investors have largely stayed on the sidelines. Concern over security breaches and regulatory uncertainty were cited as reasons for the lack of mainstream enthusiasm in digital coins.
In a sign of Bitcoin’s failure to gain an equal footing with conventional markets, CBOE Global Markets – which offered the first U.S. Bitcoin futures contracts in 2017 – said last month it would no longer offer Bitcoin futures contracts. CME Group Inc continues to list its futures product, which launched soon after CBOE.
OTC Buyers Started Picking Up Bitcoin at Lower Levels
Crypto analyst DataDash says at some point, he believes large holders of Bitcoin who have accumulated BTC in over-the-counter (OTC) trades will have a large incentive to begin spot trading on crypto exchanges to lift the price.
“We have to understand that over the past months, we’ve had a good opportunity for OTC buyers to finally start picking up Bitcoin at these [lower] levels. And once they have enough incentive, once they have enough at stake in Bitcoin markets, once they’ve built up their long term positions, they have an incentive to trade on spot market. Meaning, to clear through the order book to start buying positions on spot market.
Why would they do that? Well, it’s because they’ve got a much more substantial position that they bought OTC where they didn’t incur slippage. And now they have an incentive for price to actually have slippage to the upside, to clear through that order book, to buy some extra Bitcoin on an exchange, really across most of the major exchanges, probably around 50,000 or 60,000 Bitcoin, and from there actually increasing the value of their much larger position.
And this can happen in crypto markets, whether people think it’s moral or not. I think that’s substantially what’s happening.”
However, not everyone seems to be overwhelmed. Crypto analyst Nic Trades warned her 93,000 followers on Twitter to watch for signs that the recent surge is a false breakout.
She says a 50% drop from the height of the swing across the major exchanges is the key number to watch.
“If we come back more than 50% of this swing, that’s where I would be concerned and would say that this is probably a false breakout… I would be a little bit less bullish if we close back underneath the 200-day moving average line. A daily close under $4,714 wouldn’t be quite so positive.”
Sentiment Has Shifted Here
Brian Kelly, founder and CEO of digital currency investment firm BKCM said:
“Sentiment has shifted here. All indications that we have — whether it be fundamentals, technicals, the quantitative analysis we do — all suggest that we probably have at least started to put in the bottoming process.”
Kelly, also pointed out that Bitcoin’s past trading cycles have looked “very similar” to its current pattern.