Crypto Spring is Finally Here: Mystery Order Sparks Massive Bitcoin Rally as Altcoins Follow Suit
The past five days marked the beginning of a new season for the cryptocurrency market after a $100 million mystery order sparked a massive rally for bitcoin (BTC). As the bitcoin price crossed $5,000 for the first time since November, altcoins and tokens surged. By the end of the week, cryptos not named bitcoin accounted for nearly half of the $175 billion pie.
Price action over the last five days prompted Bloomberg to declare that “bitcoin is back.” But as Hacked has tirelessly documented over the past four months, it never really went away. As bitcoin barrels toward $5,500, it’s clear that market sentiment has shifted. If history is any indication, we may be looking at more substantial gains in the year ahead. We’ll explain why below.
Bitcoin’s Market Cap Approaches $95 Billion
The bitcoin rally began during the early hours of Tuesday UTC after a mystery trader launched a simultaneous buy order on three separate exchanges – Coinbase, Kraken and Bitstamp. According to Oliver von Landsberg-Sadie of BCD Group, the volume amounted to roughly 7,000 BTC in an hour.
At its peak, bitcoin jumped 20% and eventually crossed $5,200 for the first time since mid-November, bringing its total market capitalization to $95 billion. As of Friday, the largest cryptocurrency was still trading just north of $5,000 for a weekly gain of nearly 23%, according to CoinMarketCap. Reported trade volumes on virtual exchanges peaked near $25 billion and have since moderated to around $18 billion.
The bullish breakout followed months of gradual accumulation for bitcoin and other major cryptocurrencies. BTC had struggled to overcome $4,200, the high from December, but remained well supported around $4,000 for the better part of a month.
In terms of next major targets, investors should keep a close eye on $5,500. A move north of this level could lead to a quick recovery back toward $6,000, which was the level seen before the bitcoin cash (BCH)-inspired selloff in mid-November. The $6,000 level is also widely regarded as the breakeven rate for miners.
Bitcoin Rally: The Writing was Already on the Wall
While the extent of Tuesday’s rally caught markets by surprise, Hacked had already predicted that a trend reversal was underway. This was confirmed at the tail end of March as bitcoin successfully completed its second consecutive month in the green.
The sustained push higher reflects a broad shift in market sentiment since the beginning of the year. This is reflected in the higher than normal trade volumes have that have been observed since January. Even if you don’t buy CoinMarketCap’s volume data, we know that over-the-counter markets and derivatives activity are on the rise. Case in point: Bloomberg reported in February that “private bilateral contracts” on bitcoin were turning over anywhere between $125 million and $500 million per month.
Beyond these indicators, bitcoin is also gearing up for its third halving event, which is scheduled to take place sometime in May 2020. Despite being over a year away, the next halving event is likely to have an immediate impact on prices – at least, that’s what history says.
Pantera Capital, a crypto asset manager, recently drew attention to this fact:
“We have seen a couple of these cycles where the tide begins to shift roughly a year before block reward halving dates,” Pantera Capital tweeted March 29, referencing the relationship between block reward and bitcoin’s price. “Inflection points occurred 376 and 320 days prior to the 2012 and 2016 “halvings”, respectively. Next halving is expected May 24, 2020.”
Investors can therefore expect bitcoin to continue its rally throughout 2019. This may not be directional per se, but it looks like December 2018 marked the bottom of the most recent cycle.
Altcoin Season Arrives
Bitcoin’s gravitational pull on the broader cryptocurrency market was on display Tuesday. A double-digit rally in the bitcoin price triggered an equally large upsurge in altcoins and tokens, which went on to add tens of billions to their market cap over the next 48 hours. At its lowest point this week, bitcoin’s dominance rate had fallen to 50.2%. It was last spotted at 50.3%.
With the exception of Tether (USDT), a dollar-backed stablecoin, every major altcoin put up significant gains this week. Bitcoin cash quickly emerged as the most dominant, gaining a staggering 74% to reach new highs for the year. BCH was last seen tracking just below $300. At the high point of its rally, it had overtaken Litecoin (LTC) as fourth-largest cryptocurrency by market cap.
Litecoin regained the no. 4 seed by adding 45% during the week. It last traded just shy of $89.00. The LTC price has virtually tripled in value this year.
EOS (EOS) jumped 23%, Cardano (ADA) surged 31% and Ethereum (ETH), XRP (XRP) and Stellar (XLM) each rallied at least 17%.
The total cryptocurrency market capitalization peaked at $185.4 billion this week. It was last valued at just over $175.2 billion. Investors may recall that the market bottomed at just over $100 billion in January.
The Week Ahead
After this week’s performance, it’s reasonable to conclude that crypto winter has finally reached its conclusion. For the first time this year, the technical picture appears to be aligning with the fundamentals, a clear sign that the market has shifted.
It’s difficult to predict just how far the current rally can go, but investors should expect the ‘fear of missing out’ to influence market behavior. Over the next few weeks, it’ll be interesting to see whether retail traders get back into the game. Some of the most important proxies of retail interest are virtual exchange sign-ups and Google search trends. Hacked will be keeping close tabs of both moving forward.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.