On April 12 the bitcoin price suddenly increased with $1000. The altcoins also benefited from the bullish spike. Let’s explore the possible reasons for this abrupt increase.
The cryptocurrency market has been sleeping since the significant dip in January. However, even though in the past four months the market struggled to regain its strength, a few days ago something spectacular happened. The price of bitcoin did not rise, but it jumped $1000 in just an hour.
While some traders were afraid that the price could go down as fast as it went up, after a couple of days bitcoin is still at around $8000.
The price increase influenced the whole market. Below you can see that almost all cryptocurrencies from the top increased in price along with bitcoin. While the global market cap was circling at around $270 billion on April 11, in the next three days the market saw an increase of $50 billion.
The Possible Factors of the Sudden Rise
The crypto community has started debating the possible reasons for this unexpected price increase. Some people believe that the more and more Wall Street businesses have begun to prepare their positions in the cryptocurrency market.
However, the most plausible cause is that more and more exchanges have started to offering margin trading services. According to the market sentiment the traders were expecting bitcoin to go down another $3000 before the break-out. By following this trend, the exchanges had a lot of short orders.
Furthermore, the experienced traders will always put the stop loss above the resistance level. However other traders would choose a stop loss above the exponential moving average (EMA) which in the long run will create different levels of resistance. By doing this with bitcoin, the stop-loss orders were lining up from $7000 to $7650.
Besides the stop-loss, some traders could have used the stop market strategy which means that when a particular price is reached the market will automatically close it.
By using these strategies, the big investors pushed willingly pushed through the first resistance point. Afterward, they’ve put the orders on stop-loss which made the price to jump a bit. After the first resistance was broken, the investors went to the next point and broke that too which caused the price to spike again. This move is called stop-loss trading and on any market, this strategy makes the rate to increase abruptly and bring a lot of profits.
If we look back, the recent spike does not compare with any of the last year’s surges; it’s less dramatic but, in a bear market, a move like that can change the whole trend.