Bitcoin prices are soaring again
Story by: Paul R. La Monica, CNN Business
New York (CNN Business)Bitcoin prices shot up 15% Tuesday and briefly rose above the $5,000 level for the first time since November. But good luck finding a reason to explain the sudden spike.
Nigel Green, founder and chief executive of deVere Group, simply said in a report that “there is a growing sense that Bitcoin is back.”
Green added that “this dramatic jump is likely to attract many investors who have been sitting on the sidelines,” including big institutions.
Wild swings for bitcoin are the norm. So this shouldn’t be all that surprising, argued Naeem Aslam, chief market analyst with TF Global Markets (UK) Ltd, in a report.
“Bitcoin is a kind of a beast which has the ability to score more than 20% gain on a daily basis and we have seen this kind of rally towards the end of 2017 before the price crashed,” Aslam wrote.
He added that the big bitcoin (XBT) spike “is going to attract many investors who have been sitting on the sideline and waiting for this moment.”
Reason for the bitcoin price surge is a ‘mystery’
Lukman Otunuga, research analyst at currency brokerage FXTM, agreed. He said in a research note “sudden and explosive swings are nothing new in the world of cryptocurrency” but “the reason behind bitcoin’s aggressive jump remains a mystery.”
Still, Otunuga conceded that the “bulls could be back in town.”
In other words, bitcoin is higher simply because people are buying bitcoin. It’s a classic case of momentum investing on steroids and there might not be any real fundamental rhyme or reason to justify the spike.
Bitcoin has always been a favorite plaything for traders looking to cash in on sudden moves. This recent rally may be nothing more than that.
David Spika, president of GuideStone Capital Management, said in an interview with CNN Business Tuesday that the rally in bitcoin is likely another example of “a rebound in risk.”
Stocks surged in the first quarter — despite worries about the fact that earnings are expected to decline in the first quarter and that bond yields are falling on concerns about a slowdown in global economic growth.
“This is another sign of exuberance. It’s not justified,” Spika said.
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Nonetheless, there is no denying that bitcoin is once again having a moment. Bitcoin is now up about 25% this year and more than 60% from a recent low of around $3,100 in December.
Bitcoin evangelists swear that more consumers will use it and other forms of digital currencies such as litecoin, ethereum and XRP/ripple to buy things.
And more online retailers, such as Overstock (OSTK), Shopify (SHOP) and Newegg, are accepting bitcoin and other cryptocurrencies as a form of payment.
Wall Street is starting to recognize bitcoin as well.
Mutual fund giant Fidelity established a trading platform for bitcoin and other cryptocurrencies late last year.
But the cryptocurrency still has a long way to go before it’s anywhere close to its all-time high though. Prices peaked near $20,000 in late 2017.
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