Bitcoin soars to highest level in nearly 5 months; mystery buyer seen as catalyst

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The original and biggest cryptocurrency soared as much as 20 percent in Asian trading, surpassing $5,000 for the first time since mid-November. — AFP
The original and biggest cryptocurrency soared as much as 20 percent in Asian trading, surpassing $5,000 for the first time since mid-November. — AFP

Bitcoin burst to its highest level in almost five months on Tuesday, sending smaller cryptocurrencies up, with analysts ascribing the move to a major order by an anonymous buyer that triggered a frenzy of computer-driven trading.

The original and biggest cryptocurrency soared as much as 20 percent in Asian trading, surpassing $5,000 for the first time since mid-November. By late morning, it had settled at around $4,700, still up 15 percent in its biggest one-day gain since April last year.

Bitcoin surged to near $20,000 in late 2017, the peak of a bubble driven by retail investors that pushed cryptocurrencies onto the agenda of mainstream financial firms. But wide interest waned as prices collapsed, and now trading is mostly powered by smaller hedge funds, tech firms and wealthy individuals.

Oliver von Landsberg-Sadie, chief executive of London-based cryptocurrency firm BCB Group, said the move was likely triggered by an algorithmic order worth about $100 million spread across major exchanges — US-based Coinbase and Kraken, and Luxembourg-based Bitstamp.

“There has been a single order that has been algorithmically-managed across these three venues, of around 20,000 BTC,” he said.

“If you look at the volumes on each of those three exchanges – there were in-concert, synchronized, units of volume of around 7,000 BTC in an hour”.

Analysts could not point to any specific news or developments in the cryptocurrency sector that could explain the mystery buyer’s big order.

Outsized price moves of the kind rarely seen in traditional markets are common in cryptocurrency markets, where liquidity is thin and prices highly opaque.

So orders of large magnitude tend to spark buying by algorithmic traders, said Charlie Hayter, founder of industry website CryptoCompare.

As bitcoin surged, there were 6 million trades over an hour, Hayter said — three to four times the usual amount, with orders concentrated on Asian-based exchanges.

“You trigger other order books to play catch up, and that creates a buying frenzy.”

Bitcoin’s surge sent smaller cryptocurrencies, known as “altcoins”, trading higher. Ethereum’s ether and Ripple’s XRP, respectively the second- and third-largest coins, both jumped by more than 10 percent.

Price moves of smaller coins tend to be correlated to bitcoin, which still accounts for just over half of the value of the cryptocurrency market.

“Usually bitcoin is the leader of the market and altcoins tend to follow, as far as direction and sentiment is concerned,” said Mati Greenspan, an analyst at eToro in Israel. “Today bitcoin is in the driving seat.”

Cryptocurrency markets have been relatively calm so far this year, with bitcoin trading until today between around $3,300 and $4,200.

There have been few catalysts for big price moves of the kind seen last year. In 2018, fears of regulatory clampdowns and declining interest from retail investors saw bitcoin slump by about three-quarters.

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