After registering successively new lows in the last couple of months, cryptocurrency markets sprang a surprise on investors earlier this week. They reversed course and shot up. In less than two hours, they added $22 billion to their overall valuation to end up at $292 billion, a figure they last reached a month ago.
The price of a single bitcoin kept pace and added $600 in 30 minutes, sliding past the $7,000 mark. Again, this was a price point that the original coin last witnessed a month ago. The turnaround in cryptocurrency markets came as a pleasant surprise to investors, who have gotten used to declining coin prices over the course of most of this year. So, what caused the sudden spike in prices?
Why Did Cryptocurrency Prices Jump Yesterday?
Noted cryptocurrency analyst Tom Lee of Fundstrat was on CNBC to explain the developments. According to him, the bump in bitcoin prices was due to a combination of factors, including technical indicators and fundamental developments related to the cryptocurrency space. “Over the weekend, there were a lot of folks who kept talking about TA (Technical Analysis) and the potential for either an “inverse head and shoulders formation” or a Wyckoff buyoff,” he said. “So it sounds like the technicals were really starting to become more favorable.”
That said, he did not discount the impact of positive news developments. The world’s biggest asset manager Blackrock expressed interest in testing blockchain, the technology underlying most cryptocurrencies, for applications in its business. Credit card company Mastercard was also reported to have been granted a patent to enable faster processing of cryptocurrency transactions earlier in the week. “I think something like the Mastercard news is a positive development because it really validates the idea that digital money or blockchain money is a valid form of transaction even if it is not recognized in the US,” he said.
Will The Jump In Bitcoin Prices Last?
Several cryptocurrency experts agree that the rebound in bitcoin prices is not temporary. Over at Coindesk, Sebastian Sinclair analyzes three technical analysis signals – exponential moving averages, trading volumes, and Fibonacci retracements and extensions. According to him, the breakout is “significant and bullish in the mid-term”. Lee told CNBC the fact that bitcoin’s price was below its 200-day moving average was a “pretty positive” signal, given past precedent. The last time such an event occurred was back in October 2014, which heralded the end of bitcoin price’s move into growth territory after a prolonged slump. “If you look forward to the next six months, you’re going to do pretty well owning bitcoin,” he said.
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