3 reasons why bitcoin passed $7,000 and jumped 10% in an hour

Posted: 18 July 2018 7:20 pm
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Choose whichever theory you like best.

Bitcoin prices leapt up well beyond $7,000 in short order recently, rising almost 10% in under an hour. It's not clear what caused this spontaneous rise, but it sure is impressive.

The craziest idea might be that markets are responding to news of institutional money, and traders are generally feeling good about themselves. This certainly doesn't explain the abruptness of the rise though.

One more reasonable theory is that an unusual number of traders were shorting bitcoin based on the $6,800 resistance level provided by many technical analyses, which naturally resulted in a sharp rise in line with a short-hunting market manipulation theory.

So far, all that can be said for sure is that it's quite an inexplicable jump.

Bitcoin prices

Speaking of illogical leaps, here's a third theory on why bitcoin just spiked.

All prices are based on LiveCoinWatch, which can be a useful way of finding major outliers, assuming its data is accurate.

Stratis prices

Keen observers will note that Stratis was pumped up enormously, multiplying in value from about $3 to almost $9, thanks to a large Korean won injection on Bithumb. The exact same thing happened to Steem at the exact same time, following an almost identical pattern at the same time, rising up from about $1.70 to over $5.

But what goes up must come down, and in this case, it went down at exactly the same time bitcoin started going up. This might explain why.

This is just a very small sample of the many exchanges doing millions and millions of dollars' worth of bitcoin trading at almost double bitcoin's current market price, most prominently through STEEM and STRAT.

To recap:

  • Someone bought huge amounts of STEEM and STRAT with Korean won on Bithumb, causing those coin prices to multiply in a very short time. This happened in the hours immediately before bitcoin's sharp rise.
  • Someone then started dumping STEEM and STRAT exactly when bitcoin prices started to rise.
  • There are of a lot of examples of STEEM/BTC and STRAT/BTC pairs trading at well above bitcoin's market price on many different exchanges. This seems to be what happened to all the STRAT and STEEM that was purchased in the pumping phase.

The volumes aren't enormous in themselves, each pair on each exchange represents maybe 0.02-0.03% of bitcoin's 24-hour trading volume, but add them all up and you're looking at maybe 2% of the total bitcoin trading volume.

It's not entirely clear whether this would be enough to affect bitcoin prices in themselves, or how someone would profit that much from such an indirect pumping mechanism. It's also worth noting that those listed bitcoin prices might simply be a cosmetic anomaly in the way LiveCoinWatch reports prices, reflecting the STEEM/STRAT pumps rather than how much people are actually paying for bitcoin.

In other words, it might still be showing the people who traded bitcoin for STEEM/STRAT on the way up, and the equivalent prices they paid for it.

It's also possible that people are simply losing a lot of money chasing FOMO, and jumping through Steem, Stratis and bitcoin at well above market prices to try and catch a rise. To be fair, with all those prices changing so quickly and varying across exchanges, it can be extremely difficult to work out how much one is actually paying for something in fiat terms.

However, the timing seems to be well beyond coincidence. The S-pair clearly jumped up and then dropped at the same time bitcoin leapt. This isn't the first time fishy things have gone on with Steem and Stratis prices, while bitcoin simultaneously moves.

The following is a tentative and quite possibly completely incorrect working theory:

  • Someone starts off with a lot of bitcoin and fiat.
  • They use the fiat to artificially multiply Steem/Stratis prices, probably chosen because they have responsive markets, and there are always arbitrageurs ready to follow the Korean market lead.
  • They then trade the artificially inflated Steem/Stratis for bitcoin, also at somewhat artificially inflated prices, to drive prices up on a few exchanges. Arbitrageurs once again quickly follow the money.
  • Now there's a bitcoin price rise well beyond the initial amount of fiat put into Steem/Stratis.
  • They can now sell bitcoin at a higher price to replenish the fiat expended at the start, taking advantage of bitcoin's naturally better liquidity and any hype around the recent price jump.

Or maybe it's just people excited about institutional money coming to crypto.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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