Bitcoin (BTC-USD) surged to a five-month high early Tuesday morning.
The cryptocurrency’s price began rocketing against both the pound and dollar at around 5.30am UTC, briefly passing $5,000 for the first time since November on some exchanges. The price surged as much as 20% at its peak on Tuesday morning.
The rise didn’t appear to be driven by any news. Analysts said it was likely triggered by algorithmic trading programmes that bought after a key price level was breached. Short sellers buying bitcoin to cover losses may have also contributed to the rise.
“Momentum has been gradually building in the crypto market for a few months now and it seems it finally popped,” Mati Greenspan, a senior market analyst with trading platform eToro, told Yahoo Finance UK.
“The break above $4,200 was critical. That level had been building up for a while now so no doubt there was a group of entry orders and stops that were triggered during the Asian session.”
“This trigger was through volume led price action driving the price and triggering algos on a breakout,” Charles Hayter, CEO and founder of CryptoCompare, told Yahoo Finance UK.
“We’re seeing the period of 6am-7am GMT have 6m trades in the hour compared to average of c.1.5-2m, a 3-4x increase.”
“The breakout gave rise to further follow-up technical buying above this level this morning as a cluster of buy stop orders were triggered from breakout traders and some short sellers were forced to close out their bets,” Fawad Razaqzada, a market analyst at Forex.com, said.
“It will be interesting to see if the buyers will now be able to hold their nerve and defend this former resistance level. The next potential trouble area comes in around $5,200, a level which was support in the past.”
The price rise comes despite recent suggestion that most bitcoin trading activity is faked through activities such as “wash trading.”
“The key here is that all this wash trading that’s been discovered hasn’t actually affected the price of bitcoin itself in any meaningful way,” Greenspan, the eToro analyst, said in an email last week.
“Of the real 10 exchanges who are providing most of the liquidity in this market, nine of them are regulated and the price of bitcoin is extremely consistent among them. The fact that the price is derived directly from the market and that there’s a very low level of arbitrage between the top exchanges means that the market is even less susceptible to manipulation.”