Bitcoin has surprised even many bulls by surging more than 30% in recent days for a total gain of more than 100% this year, sweeping up other digital coins including Ether, Litecoin, and Bitcoin Cash. While crypto bulls are cheering, short sellers are piling in as skeptics argue that the current market mimics the bubble of 2018 that sent cryptocurrencies crashing.

Tony Gu, founder of NGC Ventures, a blockchain investment fund, is one of the cryptocurrency bears. “When everyone is bullish, it’s time to sell,” said the investor in a detailed story on the rebound in the Wall Street Journal.

Bitcoin's Stratospheric Surge

(Price Increase)

  • From 2018 Low: 153%
  • YTD: 110%
  • 1 Month: 58%

Source: Coinbase

Institutional Investors Warm Up to Crypto

Bitcoin’s latest rally started on Saturday when U.S. exchanges offering futures were closed. This could have presented a roadblock for short sellers seeking to cover their wagers, per a Bloomberg report. On Monday, the digital coin skyrocketed as much as 26% and broke past $8,000, coinciding with the start of the Blockchain Week conference in New York City.

While the cause of the recent crypto rally is unclear, traders have highlighted the growing interest from institutions and corporations in digital assets. To name a few, financial giants Fidelity Investments and E*TRADE Financial Corp. (ETFC) are expanding their crypto operations, Facebook Inc. (FB) is building a crypto-based system, and mainstream companies such as eBay (EBAY) and Amazon.com Inc.’s (AMZN) Whole Foods Market have announced plans to accept cryptocurrency payments. Bakkt, a project backed by the owner of the New York Stock Exchange, said this week that it will start testing Bitcoin futures within a few months.

Due to these and other trends, "The worst of the bitcoin bear market is behind us," argued cryptocurrency investor Ian King. "Multinational companies are building on blockchain technology and this brings more user adoption to bitcoin," King said, adding, "If just 10% of Facebook users adopt Facebook Coin, that would be 130 million new cryptocurrency investors into the crypto markets. "

Darren Li, a Chinese cryptocurrency investor, says that digital coins are particularly attractive to Chinese investors given a weaker yuan, rising trade tensions, and the desire to circumvent the country’s capital controls, per a detailed story in Bloomberg.

Meanwhile, according to the U.S. Commodity Futures Trading Commissions, hedge funds and other investors upped their net short bets against Bitcoin in the week through May 7. When trading began at the start of the week, futures traded on CME opened 12% higher, per the WSJ. This comes as EU regulators have made highly critical comments about cryptocurrencies. 

What's Next

While Bitcoin has more than doubled this year, igniting hopes of another major revival up to new highs past its near-record of $20,000, the cryptocurrency space remains littered with issues. Many crypto entities have gone out of business, cryptocurrencies remain highly volatile, and key parts of the business lack sufficient regulation. Last month, it was revealed that New York attorney general was investigating a major crypto operator for allegedly covering up nearly $1 billion in losses.