What to Make of Bitcoin's Bull Run

What happened?

On April 1st, BTC moved up 20% in just one hour during Asian trading hours.

  • At least 13 lots of 1,000 or more BTC block trades in  one hour.
  • Such sudden large spikes almost always squeeze out any levered shorts. Sure enough it was reported that $400 million worth of short positions were liquidated on Bitmex that night alone.
  • Large arbitrage opportunities across bluechip exchanges throughout the move. These indicate the buyer/buyers overpaid, as there were lower prices available on other exchanges during these purchases. We infer that the buyer(s) were price insensitive; unsophisticated; interested in inflating the price; or some combination of these three factors.

All of the above events are perfectly normal and easy to understand. The interesting part is that BTC prices have stayed around these new levels to date.

BTC prices have remained level. What does this mean?

  • At a minimum, it shows that the rally has exhausted systemic sellers in the near-term whether through the sheer price move or through more buyers buying into the rally.
  • We are also seeing reports from our partners that the retail buying in Asia has perked up.
  • Altcoins are running up, reinforcing the theory that retail interest has picked up.
  • The biggest difference between the previous rallies and now is that the exchange record volume both in absolute dollar terms as well volume to market-cap ratio has been the highest in its history of available data from Coinmarketcap (December 2013 - Present). Three potential explanations are:

1. Number of exchanges have increased.

2. More institutional players are in the markets.

3. More wash-trading or fake volumes on the exchanges than before.

Even after accounting for both of the above, the spike in trading volumes is impressive.

  • All the explanations for increased volume to marketcap ratio, except wash-trading are indicators that the probability of such rally in future has gone up.

Looking ahead...

  • We believe this rally will stay until a fresh wave of real sellers emerge from the woodwork.
  • Traders should watch out for movement of crypto from cold wallets to hot wallets as a signal for the rally to stall or end.

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