Bitcoin looks like it will end the week with a 15% price increase and all but four of the top 100 cryptocurrencies by market capitalization are still showing green. Investors are demonstrating increased confidence illustrated by trading volumes.
Experts have shared their predictions and explanations for the increase, which may well indicate a recovery for the cryptocurrency market after months of trepidation.
Thursday’s sudden price increase for Bitcoin is the result of what experts term a “short squeeze” and it sparked a frenzy of activity in the charts.
“This is what’s known in the markets as a short squeeze. When a lot of people are short on heavy leverage, a small movement up can trigger someone’s stop-loss,” said Mati Greenspan, Senior Market Analyst at eToro. “Keep in mind that when a short position gets closed it actually creates a buy order. After a prolonged period of moving within the range, stop losses start to pile up. And so, even a small movement in the market can trigger a chain reaction of stop losses all at once and lead to a breakout on the charts.”
The following chart from eToro shows the breakout:
The orange and blue dotted lines represent the tight range, between $6500 and $7500, that bitcoin has been trading in for the past two weeks.
“We would normally look for a test of the blue line before moving forward. However, should the excitement start to come back into this market, it might not need to.” Said Greenspan.
“The ratio of short margin trades versus longs has been increasing recently,” said Nick Kirk, quantitative developer and data scientist at Cypher Capital. “Buying volume ticked up today and a lot of these short trades got liquidated, helping fuel the rally.”
In an earlier interview with Bloomberg on April 11th, 2018, Greenspan predicted that Wall Street was “building bridges” and would “at least even things out” in the cryptocurrency markets by injecting new liquidity.
On April 6th, 2018, news broke that hedge fund legend George Soros might begin to invest in cryptocurrencies. According to reports, Adam Fisher, head of macro investing for Soros Fund Management received internal approval to trade cryptocurrencies.
Hedge Fund Research indicates the average return on funds that started investing in cryptocurrency at the beginning of 2017 is 2,908%, compared to 9% gains for traditional hedge funds over the same period.
On April 10th, 2018, Venrock, the Rockefeller family’s venture capital businesses announced a partnership with cryptocurrency investor group CoinFund.
“We wanted to partner with this team that has been making investments and actually helping to architect a number of different crypto economies and crypto token-based projects,” said Venrock partner David Pakman
The Rockefeller family has an estimated net worth of over $1 trillion, with Venrock reportedly holding $2.6 billion in managed assets. Venrock made significant gains with early investments in Intel and Apple.
“There are a lot of crypto traders in the market,” continued Pakman. “There are a lot of cryptocurrency hedge funds. This is different. To us, it looks a little bit more like venture capital.”
There are also disputed rumours that the Rothschild family now hold cryptocurrency related investments.
Commenting to Bloomberg, leading Wall Street strategist Tom Lee describes Bitcoin’s sudden price hike as “overdue”.
“We still feel pretty confident that bitcoin is a great risk-reward and we think it could reach $25,000 by the end of the year,” said Fundstrat co-founder Lee.
It’s not just Bitcoin that is seeing health price increases. Only a handful of coins in the top 100 are still showing declining prices. A number of coins have 24-hour average price increases of 20% and more.
Ripple (XRP), with the third largest market capitalization after Bitcoin and Ethereum, is currently trading at $0.67 after a 21% increase. This is directly compared to a current rate increase of 5% for Bitcoin today.
Ripple’s increase is likely fuelled by the announcement that Santander is launching an international payments service “OnePay FX” based on Ripple’s xCurrent blockchain technology. With the move, Santander becomes the first bank to offer a blockchain-based international payments service across a number of countries at the same time.
“One Pay FX uses blockchain-based technology to provide a fast, simple and secure way to transfer money internationally – offering value, transparency, and the trust and service customers expect from a bank like Santander.”
Other notable price increases include IOTA (MIOTA), currently 10th by market capitalization at 21%, NEM (XEM) at 17% and Vitalik Buterin backed OmiseGO at 18%.