Bitcoin rises 35% in 2 hours, China-based cryptocurrencies pump 30-100%

Bitcoin is flying, but today the Chinese cryptocurrencies are flying the highest.

Yesterday Bitcoin prices (orange line) charted their biggest single-day growth since 2011, going up about 35% in about 2 hours, while ETH (blue line) and XRP (other blue line) charted lesser gains on its back. The green line is Tether's market cap.

BTCUSD chart by TradingView

There are several theories as to why it's pumping. One of the most popular is that Bitcoin is feeling a wave of approval following Chinese president Xi Jinping's description of blockchain as a core technology to be nurtured, accelerated and heavily invested in.

Fine China

While Bitcoin is banned in China, a peer to peer trading scene remains, which may be able to drive markets in its own way. It's possible that the markets in China were able to drive the rise today, in the wake of Xi's blockchain advocacy.

It's also possible that traders outside China were interpreting the news as a happy sign, and moving the markets with their own buying regardless of what traders in the country were doing. You don't have to be in China to trade on the news emanating from it.

Historically, Bitcoin has often gone up and down in the wake of news from China, regardless of which currency the traders use.

Of course, it should be emphatically noted that "blockchain ≠ bitcoin", and Xi was specifically advocating for blockchain rather than Bitcoin. That said, a large chunk of the money in blockchain is inextricable from Bitcoin. Blockchain bullishness will still indirectly flow to Bitcoin prices.

How about Tether?

It's also worth looking at Tether (USDT) market cap whenever this kind of rise occurs. The theory is that a lot of USDT minting is a reliable indicator of a price rise, because it indicates demand from people outside the market who buy Bitcoin via Tether.

Even if you don't see anything there, that's telling in its own way. And that's exactly what we don't see.

The amount of USDT in circulation didn't budge throughout the rise, or in the days preceding it, which strongly suggests that the buyers in this pump are people who were holding USDT and waiting for a buying opportunity, rather than outsiders entering the market.

This lends credence to the theory that this is a pump from existing cryptocurrency whales who are hopping between USDT and BTC to cash in on the ups and downs, rather than a bunch of people getting into the market for the first time.

Tether wasn't entirely inactive though.

Now, bear with us as we verge into wildly speculative territory.

Conspiracy theories

Despite an absence of new printing, Tether has been extremely active in the last week, swapping ERC20 and Omni USDT tokens for Tron. There are at least a dozen such swaps, each worth a few tens of millions of dollars.

This just means Tether is switching tokens from one blockchain to another, kind of like using a crane to move a train from one railroad to another. In this case, we're seeing a whole lot of USDT carriages being lifted off the Bitcoin and Ethereum train tracks and transferred onto the Tron train tracks.

Here's the thing about Tron: it's pretty popular in China. Its founder Justin Sun also founded Peiwo ("China's Snapchat") and is the protege of Alibaba founder Jack Ma.

Right before president Xi talks up blockchain, we see a mass migration of hundreds of millions of dollars of USDT to one of China's most popular blockchains.

Coincidence? Maybe.

But how about the fact that among all those chain swaps there was also at least one $25 million switch of Poloniex coins, even though right now Poloniex is temporarily indisposed. It's currently being sold off to a mysterious Asian investment group, rumoured to be headed up by none other than Tron founder Justin Sun.

The plot thickens.

But Tron isn't the only cryptocurrency that's made it biggish in China, despite the trading ban imposed in the country. And today, all of those China-focused cryptocurrencies appear to be doing very well for themselves, even compared to Bitcoin.

Bitcoin vs all the other kids with the pumped up kicks

Here's a comparison of Bitcoin prices (black line) against a selection of some of China's best-known cryptocurrencies.

BTCUSDT chart by TradingView

The best-known of the bunch, NEO (China's Ethereum), is absolutely flying, along with Ontology (China's enterprise-grade Ethereum). Those are the red lines flying off to the stratosphere there.

The others are also doing very well compared to Bitcoin. These include:

• TRON (also China's Ethereum)
• Elastos (China's Ethereum but with TV boxes)
• VeChain (China's other Ethereum)
• Wanchain (China's interoperability-oriented Ethereum)
• Waltonchain (China's Ethereum, but with more RFID tags and less coherency)

Given the extreme level of interest in China's cryptocurrencies today, all of which are banned for public trading similar to the way Bitcoin is, it's probably safe to say that the news from China did indeed move the needle on Bitcoin prices.

Of course, Bitcoin isn't out of the woods from its recent falls yet. Its current price is still the very definition of a "lower high", which remains a net bearish sign, and the price surge of Chinese cryptocurrencies may mostly just be a sign that retail speculation is alive and well.

For anyone who enjoys spotting irony in the wild, it's also worth noting that president Xi Jinping literally pumped the cryptocurrency markets here. The Chinese government has tried to suppress excessive crypto shilling and reign in excessive speculation in the crypto markets, and now the president has inadvertently pumped it just by talking about blockchain.

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Disclosure: The author holds BNB, BTC at the time of writing.

Picture: Shutterstock