Behind Bitcoin’s Price Surge Upwards to Record High in 5 Months
Behind Bitcoin’s Price Surge Upwards to Record High in 5 Months
On April 2, 2019, Bitcoin (BTC) prices soared up to about $4,700 in less than an hour pushing the prices past $4,500. This represented the cryptocurrency’s highest price since late November 2018. The rise of prices has put enthusiasts and rookies hooked on their search engines to understand why the sudden price rise. Google trends data recorded a rise in interest score from 20 to 100 within the time of rising, with search queries mostly inquiring why bitcoin prices were rising, or rising. About five days later, BTC prices remain above $4,900 with frequent rise above $5,000 mark. The rise has led to speculations on what would have led to this bullish trend by the cryptocurrency, which has caused altcoins prices to surge too.
Before the Sudden Rise
The cryptocurrency industry has often been characterized by speculations of the future, which often results in trends in activities of trade in the digital assets. The last three months of 2017 saw the rise in prices of BTC, up to about $20,000, before the prices slumped to $8,000 in the first weeks of February 2018. Afterward, the prices averagely fell to new lows reaching about $3,100 by the end of 2018. The year saw the crypto coin and others in the market shed most of their value in the industry’s bear market run. 2019 has however had little activity in the crypto world, until the April 2 price surge. BTC’s prices ranged between $3,500 and $4,000. As some speculated that $3,100 would be the worst price the coin could ever achieve, others have been skeptic the prices could go lower.
Soaring prices at the start of April 2019 has received headlines from various media outlets recently, with analysts pointing out to different causes for the price surge. One media outlet reported that the sudden rise in prices would have been caused by an April Fool’s joke by a crypto blog claiming that the US Securities and Exchange Commission (SEC) had approved exchange traded fund (ETF), a statement that toped Google trend’s bitcoin-related queries. In the event of the approval of ETF, which has not yet happened, mass adoption of the cryptocurrency is expected. This may, in turn, result in soaring prices of BTC as users are more optimistic and trading volumes soar.
In another twist regarding the same ETF approval, some critics claim that the cryptocurrency exchange platforms may have relied on algorithmic trading which detected the ETF approval trends through user searches, leading to rising prices of BTC. One analyst claimed that cryptocurrency exchange platforms may be lying about their trading volumes leading to increased trading activities by users. Increasing trading activities increases demand for cryptocurrencies and hence the demand causes prices to rise.
$100 Million BTC Order
A single order of almost 20,000 BTC was spread through three different exchange platforms, with each platform receiving an order of about 7,000 BTC. This order, made within one hour, is also speculated to be the reason behind the sudden rise of BTC price. Such huge orders may have been translated as rising demand for the cryptocurrency. The buyer may have speculated an upward trend in the prices of BTC and wanted to jump in as prices were still low and make the investment more profitable. Several analysts have predicted that in the near future, BTC prices will rise, attributing the rise to many reasons including massive adoption of cryptocurrencies. Also, the upcoming halving of BTC rewards is expected to trigger trading activities as has been on the past halving instances.
What is halving? During the mining process, a miner is rewarded newly minted BTC. However, the number of BTC to ever exist is limited to 21 million, causing the rewards to be halved after every 210,000 blocks. For instance, the rewards now at 12.5BTC will be halved to 6.25BTC after 210,000 new blocks are created.
The trend has often predicted the new lowest prices level in a bear run before a rise in the prices begins. In this case, $3,100 has been predicted as the bullish run’s starting point, with prices expected to rise going into the future as we approach the next halving.
The United Kingdom in a majority vote referendum voted in 2016 to leave the European Union. However, it has failed to approve a deal that will enhance its relations with the EU countries after leaving the union. Recently, the EU extended the deadline for the UK to leave up to April 12, 2019. With no deal and the deadline fast approaching, analysts speculate that citizens who fear for a weakening currency have started purchasing BTC. This speculated increase in trading activities may have resulted in the rise of BTC prices, reaching record high figures. Also, related to this speculation are reports of an increasing number of active BTC wallets, two weeks before this price surge. Following the bear run, short-term investors sold their digital assets as long-term investors’ wallets remained dormant during the past six months. However, the rise in activities may be related to the speculation on UK citizens’ trading activities on BTC.
Breaking the $4,200 Mark
Analysts relied on $4,200 price for BTC, this year’s previously highest value before April, 2, marking it as a testing point for BTC’s performance this year. Surpassing the mark may have triggered optimistic investors to buy BTC, increasing the trading activities and consequently the price of the coin, which has since reached and surpassed $5,000 mark.
Behind this sudden rise are several thoughts on what might have triggered the scenario. Unlike in traded stocks, the decentralization of blockchain technology and anonymity of users makes it difficult to identify the core reasons for price surges or slump. However, the rising and falling of the prices of BTC and other cryptocurrencies rely on basic business principles of demand and supply, which affect the trading activities, including trading volumes of cryptocurrency exchange platforms. A rise in demand for cryptocurrencies, of which BTC is the most popular, may have resulted in the surging of prices on April 2. While the specific cause for the rise in demand may not be proven, expect the cryptocurrency’s prices to fall and rise again going into the future. The industry experiences high price volatility and requires that an investor keenly studies the market before opting to invest in any crypto coin.