From whales and trading software - This is how the Bitcoin rally can be explained
Markets are complex social constructs. The amount of information that manifests itself in the price of a particular good is as enormous as it is varied. As a result, price increases or falls can rarely be explained by individual messages. This applies equally to classic securities markets as well as to the crypto market.
However, the crypto market, with a market capitalization of $ 173 billion, is still relatively small compared to stock markets. As a result, high-volume orders can sometimes have some impact on price performance.
So, given the many messages about the coordinated purchase of 20,000 BTC, the green candles of the past few days could be a gift from a single market player. How valid is this explanation?
Market analysts these days throw the wildest speculation about the background of the Bitcoin price rise into the balance (even an April Fooling News about the Bitcoin ETF is in the game). One of the more plausible explanations, however, is related to so-called algorithmic trading software.
Oliver von Landsberg-Sadie, CEO of London-based crypto-broker BCB, believes that
“There was a single order of about 20,000 BTC, which was algorithmically managed across these three locations [Coinbase, Kraken and Bitstamp]. If you look at the volumes on each of these three exchanges, there were concerted, synchronized orders of around 7,000 BTC in one hour”.
These in turn have led to an increase in demand from other market participants, and the high trading volume has then triggered automated orders that have driven up the Bitcoin price in turn. So you could explain the drama with a kind of cascade effect.
The purchase of about 20,000 Bitcoin worth about 80 million US dollars by a single actor, however, is more than just a drop in the ocean. After all, this equates to about 0.1 percent of the total bitcoin supply. The emergence of the Bitcoin whale should therefore be a first indication of the immense price movements of the last days.
Growing devaluation makes Bitcoin attractive
The Venezuelan population has demonstrated sufficiently that high inflation rates can increase interest in deflationary cryptocurrencies such as bitcoin. But even on the European continent there is a state whose fiat currency is galloping devalued. We are talking about Turkey.
For some time now, the purchasing power of the Turkish Lira has been falling rapidly, with the inflation rate alone exceeding 20 percent in January of this year alone. As we reported, this increases interest in Bitcoin & Co. - one in five Turks is said to be already in possession of cryptocurrencies.
As the news portal zerohedge reports, bitcoin adaptation could progress much faster in countries with dysfunctional currencies. Stock rallies such as those of the last few days may have increased interest again.
Next Stop: $ 6,000
That’s all very well. But where does the journey go from here? In short, nobody knows - hardly anyone has anticipated the recent rally. However, there are some indicators and they are bullish.
For example, for the first time in a year, Bitcoin was able to break through the 200 Day Moving Average; in analyst circles this is considered a bullish price signal.
Brian Kelly, CEO of crypto-investment firm BKCM, set the price target in conversation with CNBC at $ 6,000:
“All the indicators we have - whether fundamentals, technical data, or the quantitative analysis we are conducting - indicate that we have probably found a bottom. […] A reasonable price target is probably 6,000 US dollars”.
Recent price movements should remind us how unpredictable the crypto market is. Much can be reasonably classified retrospectively; however, it is difficult to predict how the journey will continue.
The signs, however, are bullish.