The strongest price jump since 2011

Sometimes price charts are heavenly. On last Friday evening, around 6 p.m., the Bitcoin price started at around 6,800 euros (7,500 dollars) at a soft rise, which raised it to more than 7,000 euros (just under 7,800 dollars) by around 8 p.m.. The remainder of the evening this rise continued, until the price stood at two o’clock in the night approximately with 7.400 euro. Then there was no stopping: in two hours the price jumped to more than 9,000 euros (9,900 dollars) and briefly reached a high of around 10,200 dollars on the dollar exchanges. From there it sank a bit again to reach a level of around 8,500 euros (9,400 dollars) today.

In short: The Bitcoin price rose by almost 2,000 dollars over the weekend. Such a rapid increase of more than 30 percent in less than 12 hours has not been seen at Bitcoin since 2011. Volatility is back in full force and it’s as exciting as ever to watch Bitcoin prices.

There are some interesting observations about this crazy price event. Firstly, it is noticeable that the US futures exchange Bakkt, which opened about a month ago and has so far been trading a disappointing volume, woke up that night. With 1183 Bitcoin Bakkt made a record volume, which surpassed the previous days five to ten times. Even today, after the excitement was supposed to have subsided, Bakkt is still quite strong with almost 300 Bitcoin trading volume early in the day. Was the fall to $7,500 and the subsequent rise the signal institutional investors were waiting for?

 

There are some interesting observations on this crazy price event. First of all, it is noticeable that the US futures exchange Bakkt, which opened about a month ago and has so far been trading a disappointing volume, woke up that night. With 1183 Bitcoin Bakkt made a record volume, which surpassed the previous days five to ten times. Even today, after the excitement was supposed to have subsided, Bakkt is still quite strong with almost 300 Bitcoin trading volume early in the day. Was the fall to $7,500 and the subsequent rise the signal institutional investors were waiting for?

The mempools of unconfirmed transactions are also calm. It may have swelled a little, but even that is not really visible in the medium term. There is just as little increased interest in Google as there is increased demand for Bitcoin transactions.

A third observation is that the trading volume on the stock markets has broken new records to a large extent. At 48 billion dollars, almost 30 percent of Bitcoin’s market capitalization (169 million dollars) was traded. The dollar token tether, however, recorded a significantly higher volume, reaching an all-time high of 58 billion dollars. Statistically, each of the 4.1 billion tether dollars changed hands 14 times that day. Tether apparently became the dominant unit of account on the stock markets and probably also the most important medium for shifting values from stock market to stock market. Since Tether’s transaction is spread over several blockchains – Bitcoin, Ethereum and Tron – this could explain why the turbulence on the stock markets has not left an elephant footprint in the mempools of unconfirmed transactions.

 

However, the crucial question has not yet been answered: What was the reason? Everything has a reason, especially if the strongest digital currency makes a profit of more than 30 percent within 12 hours. During this time, Bitcoin has received approximately $40 billion; market capitalization has increased from $138 billion to $178 billion. Why?

The usual explanation here is that, once again, it is China. At least most media argue so. Because on Friday, the day the Bitcoin Prize began to jump, China’s President Xi Jinping swore the country to blockchain technology in a speech (here’s the translation of the press release). On the occasion of the presentation of a technology study, Xi said before a party meeting that the “integrated application of blockchain technology” plays an “important role for new technological innovations and industrial change”. He called on his party to “see the blockchain as an important breakthrough for independent innovation of core technologies” and to intensify efforts towards standardization, basic research and practical application.

 

The push is undoubtedly interesting and deserves to be explained more thoroughly elsewhere. But I doubt it is the reason for the rapid rise in price. Because Xi Jinping relies on the blockchain as the technical infrastructure, not on Bitcoin as the currency; the rather unfavorable legal status of Bitcoin in China is unlikely to change as a result of the speech; a practical influence on Bitcoins and the demand for the digital coins is unlikely to emerge from it.

Much more likely, however, is that the price will move. The eternal struggle of the optimistic bulls with the pessimistic bears has its own dynamics. As already described, an important threshold was 8,000 dollars. After Bitcoin walked a little along this mark, the price fell significantly below it. In part, the price plummeted to below 7,400 dollars. The situation here was quite critical, another case in the chart would have suggested a fall of around 5,000 dollars – in between there is no visible bottom – which would have almost eaten away the profit of the rally since early summer.

So the bears have tested an important limit. The price fell on 23 October with high trading volume to around 7,500 dollars. The bulls initially did not react. The price has been cuddling around at this threshold for two days; the bears appear to have been exhausted, which the bulls used shortly thereafter to raise the price to $7,750 and then light a fireworks display. The fact that the fall below the 8,000 dollar mark did not lead to another slump, that the floor also held at 7,500 dollars, and that things were going up again from there – that could have been the signal that brought the suppressed optimism of the markets to a sudden outbreak. But that too is speculation, of course.