- Cryptocurrencies have surged and held onto most of their gains.
- There are seven reasons behind the move that caught some by surprise.
- There are good reasons to believe the rally will continue.
Bitcoin has not seen the $5,000 mark since November 2018, and now it happened. Ethereum also enjoyed a rally and even Ripple eventually advanced. The leap initially seemed to be a "fat finger" or another spike but has since consolidated with BTC/USD making another move across the 5K mark.
The consolidation shows the rally is mature with many level-headed analysts pointing to higher levels after the dam has been broken.
After long months of low volatility below and around $4,000, the spring rally caught many by surprise. What happened? Why now?
Seven reasons for the move
1) Flipside report: Flipside, a research company, stated that the market is humming. The firm does not only track prices but also developer behavior and market maturity. Its FCAS 25 index is at new highs, above levels seen when Bitcoin traded around $8,000. Flipside CEO Dave Balter was quoted by MarketWatch, giving the report a more significant impact.
2) Brian Kelly's comments: BKCM CEO Brain Kelly said on CNBC, another major outlet, that Bitcoin prices could hit $6,000 soon. The world of digital currencies is awash with bullish predictions, but this one, coming from a development firm and setting a reasonable target, resonated with many investors that are not HODLers.
3) Arthur Hayes comments: Another commenter is also a CEO, of an exchange. Bitmex's top guy Arthur Hayes, made a more ambitious claim, but with a broader time span. He said that Bitcoin could see $10,000 before year end.
4) Short squeeze: All those bullish comments come after a long "crypto winter" that may have caused too many investors and traders to go short. Binance CEO estimated that no less than $500 million worth of shorts were squeezed in the rally. When everybody is short, who is left to sell? This is not a quote from the crypto exchange's CEO, but a reality in many financial markets. The short-squeeze was probably the trigger for the initial surge.
5) Cash accumulation: According to Three Arrows Capital CEO Su Zhu, there are around $6 billion in cryptocurrencies. These are held on exchanges, cryptocurrency funds, and also stablecoins: around $2 billion in each of these assets. Zhu joined Hayes in mentioning the $10K target for BTC/USD.
6) Technical: Those following the technical analysis by Tomas Salles were not totally surprised. On April 1st, just before the rally, he wrote
The DMI on the 4-hour chart on both sides of the market remains below the ADX line, which implies a layer of general weakness for both sides of the market. This type of structure facilitates the appearance of violent and unexpected movements."
He also mentioned $6,000 as a potential target.
7) April Fools' hoaxes?: That same day before the rally, April 1st is April Fools' Day. Publications all over the world published fictional stories about every possible topic. That also happened in the world of cryptocurrencies. One of those said that the US SEC approved a Bitcoin ETF. The article ended with a mention of April Fools' Day, reflecting the fact that it was fictional. Nevertheless, this hoax, transparent as it was, alongside others, may have been the trigger. Bloomberg, a respected outlet, also mentioned such hoaxes as potentially pushing prices higher.
Upside targets
Apart from $6,000 and $10,000 mentioned earlier, here are additional upside targets from Salles' most recent analysis:
Above the current price, the first resistance level is at $5,500 (price congestion resistance), while the second resistance level is in a confluence zone formed by three levels of price congestion resistance at $6,300, $6,400and $6,500. Above these levels, BTC/USD would be back to the previous scenario, and the right thing would be to restart it once again.
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