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Bitcoin Surges as Cryptocurrency Market Suddenly Springs to Life
Cryptocurrency traders may not know what caused the abrupt surge in Bitcoin on Tuesday, but they’re going along for the ride anyway.
The biggest virtual currency climbed to a fresh 2019 high on Wednesday, building on a spike yesterday that many market participants struggled to explain. Bitcoin increased as much as 5.9 percent to $5,087.54 at 11:10 a.m. in Hong Kong, according to Bloomberg composite pricing. Rivals coins including Ether and XRP also advanced.
With the Bloomberg Galaxy Crypto Index now up more than 77 percent from its low during the depths of last year’s crash, the debate over whether virtual currency prices have bottomed is heating up. Crypto diehards see Tuesday’s surge as confirmation that a new bull market has begun, while bears argue that entrenched skepticism among regulators, institutional investors and consumers will make any rally temporary.
An abrupt surge in Bitcoin sent the world’s most popular cryptocurrency to the highest level since November, jolting the $160 billion market for digital assets after three months of calm.
Sudden swings in Bitcoin are nothing new, but price action had been relatively subdued this year as investors weighed the prospects for mainstream adoption after last year’s 74 percent crash. Market participants say big buy orders in Bitcoin can often lead to outsized moves, in part because volume is spread across dozens of venues. Trend-following individual investors and short covering can also exacerbate volatility.
“The Bitcoin market and crypto market in general continues to be small relative to the rest of the markets — and emotional,” said Jehan Chu, managing partner at blockchain investment and advisory firm Kenetic Capital. “It’s still very much subject to waves of enthusiasm. I don’t think today is anything special.”
Even after paring some of its gain, Bitcoin was trading up 15 percent at $4,737.59 as of 11:35 a.m. in New York. Rival coins Ether, Litecoin and Bitcoin Cash jumped by double digits. Cryptocurrency-linked stocks including Remixpoint Inc.and CMC Markets Plc advanced.
George Harrap, chief executive officer at Bitspark, said he’s putting “most things on pause” until the market settles down. His contacts in the Bitcoin community have yet to identify a catalyst for the sudden jump.
Traders struggled to pinpoint reasons for the rally, though some noted a flood fresh interest after Bitcoin breached the $4,200 level. The cryptocurrency briefly topped $5,000 and the value of digital assets tracked by CoinMarketCap.com jumped by about $17 billion in less than an hour.
Among potential triggers discussed on trading desks and in social media: short covering by traders who had stop-loss orders around the $4,200 level, computer-driven trading and an April Fool’s Day story on a little-known online news site claiming that the U.S. Securities and Exchange Commission had approved Bitcoin exchange-traded funds.
“Bitcoin is still primarily retail-led,” said Craig Erlam, senior market analyst at Oanda Corp. in London. “It’s still a relatively unsophisticated area of trading,” giving more credence to breaking the $4,200 level than an April Fool’s hoax.
The cryptocurrency’s susceptibility to wild price swings has made it popular among speculators, who are eager for a return to the glory days of 2017 when Bitcoin surged more than 1,400 percent.
Yet extreme volatility is also one reason why the virtual currency has failed to catch on as a global medium of exchange, as intended by its pseudonymous creator. Erratic moves have also deterred institutional investors, whose concerns about cryptocurrencies range from uncertain regulation to exchange hacks and market manipulation.
One research report last month asserted that most of the trading volume on the world’s largest cryptocurrency exchanges is questionable. A separate report said trading is often inflated by unregulated platforms.
“Events such as today’s will probably be seen negatively, or viewed as this market doesn’t conform to the trading of traditional instruments,” said Dave Chapman, CEO of crypto exchange ANXONE. “We have to realize that this asset class is only a decade old, and it only started getting mainstream attention five years ago.”
— With assistance by Todd White, Justina Lee, Yuji Nakamura, Eddie van der Walt, and Dave Liedtka
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