“It’s still very much subject to waves of enthusiasm. I don’t think today is anything special.”
Even after paring some of its gain, Bitcoin was trading up 15 per cent at $US4,752.62 in afternoon trade in New York. Rival coins Ether, Litecoin and Bitcoin Cash jumped by double digits. Cryptocurrency-linked stocks including Remixpoint and CMC Markets advanced.
George Harrap, chief executive officer at Bitspark, said he’s putting “most things on pause” until the market settles down. His contacts in the Bitcoin community have yet to identify a catalyst for the sudden jump.
“The reason why? Anybody’s guess at the moment,” Harrap said.
Among potential triggers discussed on trading desks and in social media: short covering by traders who had stop-loss orders around the $US4,200 level, computer-driven trading and an April Fool’s Day story on a little-known online news site claiming that the US Securities and Exchange Commission had approved Bitcoin exchange-traded funds.
“Bitcoin is still primarily retail-led,” said Craig Erlam, senior market analyst at Oanda Corp. in London. “It’s still a relatively unsophisticated area of trading,” giving more credence to breaking the $US4,200 level than an April Fool’s hoax.
The cryptocurrency’s susceptibility to wild price swings has made it popular among speculators, who are eager for a return to the glory days of 2017 when Bitcoin surged more than 1,400 per cent.
Yet extreme volatility is also one reason why the virtual currency has failed to catch on as a global medium of exchange, as intended by its pseudonymous creator. Erratic moves have also deterred institutional investors, whose concerns about cryptocurrencies range from uncertain regulation to exchange hacks and market manipulation.
One research report last month asserted that most of the trading volume on the world’s largest cryptocurrency exchanges is questionable. A separate report said trading is often inflated by unregulated platforms.
“Events such as today’s will probably be seen negatively, or viewed as this market doesn’t conform to the trading of traditional instruments,” said Dave Chapman, CEO of crypto exchange ANXONE.
“We have to realise that this asset class is only a decade old, and it only started getting mainstream attention five years ago.”