Well, I was planning on writing about something different today, but then this happened:
At around 5am, for no apparent reason, bitcoin popped 15% in an hour, smashing through the $4,200 barrier and levelling out at around $4,770.
Fast forward nine hours, and it’s clear this wasn’t a failed breakout. Bitcoin is still holding strong, and almost every crypto in the top 100 has come with it.
Throughout this crypto winter, green days have been fairly common. But this one is significant for three reasons.
Firstly, there is the sheer magnitude of this move.
At time of writing, bitcoin is up more than 15% in the last 24 hours, with many altcoins up even higher than that.
Over the last 16 months, we have had green days, even a few green days in a row. But the gains in these days were small. Almost insignificant. And then, without fail, we’d see a single day of red that would wipe out all these gains in a matter of minutes.
This move is almost the exact opposite of that. For once, the big, sudden move is upwards not downwards.
And that brings us to the second reason this is significant.
For the last 16 months, bitcoin was stuck in a pattern of, as my colleague Eoin Treacy likes to say, “lower rally highs” and “lower lows”.
What that means is every price rally hit a lower high than the last one did, and every price crash brought the price lower than the last one, too.
This is a quintessential trait of a bear market.
Then in February something changed. Since February each low has been higher than the last.
This is what traders look for when trying to spot a trend reversal. It shows that the bottom might be in. The worst might be over.
The thing you need to really confirm a reversal, though, is a strong, sustained breakout. And that’s what we might be looking at right now.
Which brings us to the third reason this rally is significant.
The biggest barrier for bitcoin to breakthrough in the short term was $4,200. Many crypto commentators agreed that if bitcoin could creep past $4,200, we would be out of bear territory.
Well, that recent rally smashed through $4,200, all the way to $4,800. That huge $4,200 barrier proved no problem at all.
It’s clear that this latest rally is something special.
This move blindsided crypto traders all around the globe, but Eoin Treacy alerted us to it on Monday
If you’re a regular reader you’ll know that Eoin Treacy records a three-minute market analysis video every day for Exponential Investor Premium subscribers.
(If you’re not an Exponential Investor Premium member, you can join here. As you’ll see in a second, it’s well worth the entry cost.)
Eoin is a world renowned trader and money manager. That probably isn’t news to you. I’m sure you’ve heard me say that many times before.
But what you may not have noticed is that in Eoin’s Exponential Investor Premium videos, he successfully called the massive bitcoin rally in late 2017, off the back of bitcoin futures, and vitcoin’s capitulation shortly after.
He also called bitcoin’s last big crash in November 2018, and just this Monday he said:
Bitcoin today is more interesting than it has been in more than a year. The worst of the decline is over.
What that tells us is there is an accumulation going on. The people buying bitcoin are now bullish again.
He clearly stated:
Something is happening today in cryptocurrencies that we do need to pay attention to.
And, if you’re an Exponential Investor Premium subscriber, you’ll know that he also made a bold prediction for another popular crypto that is yet to come to pass.
Given Eoin’s track record with these predictions, I’m pretty excited about that one.
The main reason I thought this was impressive was because this is the exact opposite of what many of the YouTube crypto traders were saying.
Most of them were stating we were heading for a big crash.
What did Eoin see that they all missed?
Personally, I don’t know. I’m not a professional trader. That’s why I’m glad we have Eoin on hand.
So if you want to benefit from Eoin’s market analysis videos – and he doesn’t just cover crypto, if there’s anything interesting happening in any market, you can be sure he’ll alert you to it – you can join Exponential Investor Premium here.
And if you’d like to know exactly why Eoin is so excited about crypto right now, you need to read this month’s Frontier Tech Investor.
In it Eoin shows how the three most exciting tech trends right now: cloud computing, crypto and 5G are really all part of the same revolution. And how one simple investment could set you up to profit from all three.
If you’re not a Frontier Tech Investor subscriber, don’t worry, you can take out a trial here and get full access.
Why did this happen, and is the crypto winter really over?
I guess the bigger question here is, why did this happen, and will it really be sustained?
As I said, bitcoin popped more than nine hours ago, and it’s holding steady. By the time you read this, however, it may be another matter.
This reversal is made all the more mysterious because no one seems to know why it happened.
Eoin called it by looking at the charts. But something of this size usually comes ahead of, or on the back of, major industry news.
Going from that perspective, I can think of three potential reasons, but none are really big enough to account for this move.
In March the Chicago Board Options Exchange (CBOE) announced it was closing its bitcoin futures programme.
Although it doesn’t sound like it, this is actually a big positive for bitcoin prices. CBOE futures were cash settled.
That means people could “bet against” bitcoin without having to invest in bitcoin to do it.
Here was Hacker Noon’s take on it in late March:
Bitcoin Cash Backed Futures were Damaging for Bitcoin
Back in 2017 when BTC cash backed futures were first introduced, tech analyst Gene Munster stated:
“[Bitcoin futures] could have a material negative impact on the price of Bitcoin [as] investors will have an easier time betting against bitcoin”
As it happens, this was true. Shortly after CBOE and CBE launched their futures contracts in December 2017, the price of Bitcoin plummeted. Cash based Bitcoin futures essentially allowed speculative investors to bet against the price of Bitcoin, and settle in cash.
In contrast, Bakkt’s upcoming BTC futures is settled in Bitcoin, providing a derivative much more closely correlated with the actual Bitcoin market itself.
Many have speculated that CBOE’s cash backed futures led to particularly wealthy participants intentionally causing market volatility within the BTC markets, to profit in cash via positions in cash backed futures contracts.
Whilst this is of course highly speculative, overall sentiment in the cryptocurrency community seems to have welcomed the close of the the CBOE BTC futures with open arms.
The next reason is the launch of Coinbase custody’s income programme for institutional investors.
Last week Coinbase announced it would allow institutional investors to get a 6.6% yield by investing in Tezos.
Tezos itself is nowhere near as well-known as bitcoin or Ethereum, but it made a big splash in late 2017 with its record-breaking initial coin offering (ICO).
It’s been mired in legal trouble, but that seems to be mostly behind it now. I’ve been following it since before its ICO (thanks to Sam Volkering) and I can tell you it’s shaping up to be a very promising project.
The fact that Coinbase is offering big institutions a safe way to invest in it and collect a 6.6% yield while doing so, will surely have drawn attention from some pretty big names.
Before bitcoin’s pop, Tezos was already more than 160% up for the month.
And then there is Fidelity.
Fidelity is one of the biggest names in investing. It has $7.2 trillion in assets under management, and it is on the cusp of launching its crypto trading and custody platform.
On 31 January it announced it was getting close to a full release. From Fidelity:
We are currently serving a select set of eligible clients as we continue to build our initial solutions. We’ve established a robust set of technical and operational standards at a level that institutions have come to expect from Fidelity.
Our initial clients are an important part of our final testing and process refinement periods, which will eventually enable us to provide these services to a broader set of eligible institutions.
As usual with crypto, you could attribute this pop to any number of causes. And the most likely explanation is it’s not just one factor but a combination.
If the bottom really is in and this latest rally holds, the next few months are going to be interesting to say the least.
All throughout the crypto winter I have been covering the biggest developments and ranking my favourite coins in my Crypto Wire newsletter.
In the last few months I have ranked VeChain, MKR, BAT and a number of others. As well as showing how institutional investors will affect the market, and how blockchain is set to revolutionise a number of key industries.
Crypto Wire comes free when you subscribe to Eoin Treacy’s Frontier Tech Investor. Take out a trial and you’ll get access to the full Frontier Tech Investor and Crypto Wire archive.If that sounds like something you might be interested in, you can find out more here.
Until next time,
Editor, Exponential Investor