On April 3, bitcoin rose by 20% in a single day, returning to the $5000 mark, making its total market value close to $88.5 billion. So what's the reason for bitcoin's soaring price?
Bitcoin's sudden surge has led analysts to speculate about the reasons. Some say it's because of technical factors, while others think it's a long-term outbreak coming.
Joseph young, an analyst at Forbes cryptocurrency, attributed the rise to technical factors. He tweeted: 'it seems that bitcoin's surge today is only technical. Once it breaks through $4200, it starts to soar. '
Twitter analyst maxkeiser believes that when the federal funds composite interest rate index (USONFFE) experienced a reversal of the trend last time, just as the Internet bubble burst, the index once again touched on the long-term trend line resistance or indicated that the new round of economic crisis in the United States was approaching. Although it had no direct correlation with the price of the bitcoin, the US dollar lost or became the new hedge asset of BTC. Opportunity. BTC was just born when the index turned last time, but this time, he thinks, the opportunity of long-term price explosion has come.
Xiao Lei, a financial analyst, believes that the sudden rise is mainly due to two reasons.
On the one hand, the U.S. Congress has introduced two bills related to cryptocurrency, aiming to solve the problem of price manipulation that investors continue to worry about in this market, and to improve the competitive advantage of the United States in the emerging industry of cryptocurrency. On the other hand, bitcoin continues to fluctuate at a low level. Under the background of the strong US dollar and the continuous rise of global risk assets, bitcoin still has not set a new low, which indicates that the holders of bitcoin market have been reluctant to sell. As long as there is a little news or demand stimulation, it may rapidly increase the buying price and lead to price rise.
On the news side, there are two events that are considered to be the direct reasons for the rise of bitcoin.
The first event was caused by the rise of bitcoin orders worth $100 million.
According to Channel News Asia, bitcoin soared to the highest level in nearly five months today, the biggest one-day increase since April last year. Analysts believe that bitcoin's surge is due to a large order from an anonymous buyer, which triggered quantitative trading orders.
The chief executive of BCB group, a London based cryptocurrency company, said: 'the surge in bitcoin is likely due to $100 million worth of algorithmic trading orders from coinbase, Kraken and bitstamp. Among the three exchanges, an automatic trading order bought 20000 bitcoins in the three exchanges. 'the price volatility rarely seen in traditional markets also seems to be applicable in cryptocurrency markets because of their weak liquidity and highly opaque prices.
As a result, large orders tend to trigger buying from algorithmic traders, says Charlie Hayter, founder of cryptocompare, an industry website. Hayter said that with bitcoin soaring, there are 6 million transactions per hour, three to four times the normal number of transactions, and orders are mainly concentrated in Asian exchanges. This triggered the follow-up of other payments, resulting in a buying frenzy.
The second event is the worsening collapse of the Turkish currency.
On March 27, Turkey's stock market plummeted by 7%, the overnight swap rate soared to 1200%, and the lira, the legal currency of the government, suffered from serious inflation. When this national currency was in trouble, bitcoin encountered a lot of bills, and the sudden increase in demand triggered the rise of bitcoin.
A similar incident happened at the beginning of last year. In early 18, Venezuela's currency Bolivar collapsed, with a depreciation rate of thousands, and the purchasing power of paper currency sharply reduced, which stimulated the local people's demand for bitcoin. The local bitcoin trading volume increased significantly, and the price of bitcoin also rose sharply.
In addition to the above possible reasons, there are also some fundamentals that support the surge. For example, the recent trading range of bitcoin has dropped to the lowest level in several years, and the low volatility of the disk has reduced the upward pressure. In addition, there is rebound demand in all aspects of market sentiment and technology. In this case, the main force will stimulate the market in order to retain funds.
What is bitcoin
The concept of bitcoin was first proposed by Nakamoto on November 1, 2008, and was officially born on January 3, 2009. According to the idea of Nakamoto, the open source software is designed and released, and the P2P network on it is constructed. Bitcoin is a virtual encrypted digital currency in the form of P2P. Point to point transmission means a decentralized payment system.
Unlike all currencies, bitcoin does not rely on a specific currency institution to issue. It is generated by a large number of calculations based on a specific algorithm. Bitcoin economy uses a distributed database composed of many nodes in the whole P2P network to confirm and record all transactions, and uses cryptography design to ensure the security of all aspects of money circulation. The decentralized nature and algorithm of P2P can ensure that it is impossible to artificially manipulate the value of bitcoin through mass production. The design based on cryptography can make bitcoin only be transferred or paid by the real owner. This also ensures the anonymity of money ownership and circulation transactions. The biggest difference between bitcoin and other virtual currencies is that the total amount of bitcoin is very limited and it has a strong scarcity. The monetary system used to have no more than 10.5 million in four years, after which the total number will be permanently limited to about 21 million.