Bitcoin, which has soared over the last two days to top $5,000 for the first time this year, taking the market by surprise, and causing many bitcoin bulls to celebrate (perhaps prematurely) a return to the glory days of late 2017, where bitcoin and many other cryptocurrencies added thousands of dollars to their individual prices almost overnight.
The bitcoin price has risen by almost 30% since Sunday after steadily gaining throughout March and left many analysts and traders scratching their heads over the precise cause of the bitcoin price breakout.
If that reason isn’t based on strong fundamentals, it could mean the latest rally is short-lived, with some major coins, including ethereum, Ripple’s XRP, binance coin, stellar, monero, and tron already somewhat giving up their latest gains.
The bitcoin and wider cryptocurrency market has added an eye-watering $30 billion since Monday morning, with a big leap taking it up by $15 billion in a matter of minutes on Tuesday.
The cause of the sudden bitcoin price boom is still uncertain but many traders and analysts have put it down to a major order place by an anonymous buyer, which set off a wave of algorithmic buying as computer programs scrambled to place orders of their own and not miss out on the sudden price surge.
Now, the likes of bitcoin rivals ethereum, Ripple’s XRP, binance coin, stellar, monero, and tron have already begun falling back, losing between 0.5% and 4% each over the last 24 hour trading period, according to the latest prices from CoinMarketCap, which tracks most major cryptocurrencies.
Despite those latest falls, these so-called alt coins, a term to refer to any cryptocurrency other than bitcoin, remain far above the levels they were trading at last week—though some analysts are wary these gains will last.
“You can’t slay what was never really there in the first place,” said Mati Greenspan, senior market analyst at brokerage eToro. “Price action has been bullish lately but we need to see it sustained over a longer period of time to call it a bull market.
“Last night’s pullback is hardly discouraging though. It’s usual to see some sort of profit taking after a surge like that. The key question is how far the retracement will take us?”
Meanwhile, traders and analysts were still upbeat about bitcoin’s prospects.
“Bitcoin has sprung back to life on a new wave of momentum,” said eToro’s Simon Peters. “Though some bears still remain, this move could signal that the majority of investor sentiment is now turning bullish. Breaking above the $5,000 psychological barrier means bitcoin’s next resistance level is due for recalibration.
“The new resistance level of $6,000, where price held for months last year, is now in play. What happens next will be crucial. How price reacts to a retest of the $6,000 level will have a lasting impact on the mid- and long-term outlook for bitcoin.”
Elsewhere, some bullish market commenters were quick to jump on the bitcoin price rise, calling an end to the bitter bitcoin bear market that’s gripped the sector for months, branded crypto winter for its debilitating effect on the sector.
“After being in bear territory there is a growing sense that bitcoin is back,” said Nigel Green, founder and chief executive of deVere Group. “I’m now calling that the market has bottomed and the so-called crypto winter has come to an end.
“I believe bitcoin will now move higher over the next few weeks and months, making steady gains for investors. As the largest cryptocurrency by market cap, this will have a positive impact on prices in the wider crypto sector.”