The price of bitcoin exploded overnight, rising from US$6,870 (AU$8,859.21) to US$8,034.17 (AU$10,360) in an hour, according to prices quoted from Coindesk.
From there prices pulled back slightly. At time of writing, bitcoin is at US$7,845.11 (AU$10,116.66). That’s still up more than 13% in 24 hours.
Why did bitcoin’s price suddenly rise?
There’s no one specific piece of news that can be pointed to as being solely responsible for the sudden jump. Instead, it seems that a number of factors came together at the same time. And once the move began gathering momentum, it quickly took off as short trades were unwound — traders betting against bitcoin were forced to reverse their trades as the price rose, driving it even higher, faster.
This may have triggered automated trades from large investment funds. Pre-programmed buy levels pouring money into the market could have added even more momentum to the move, causing a snowball effect.
Free Guide: Cryptocurrency expert’s three-step guide on how to buy your first bitcoin. Get started today
Some in the bitcoin community have speculated that the rise was initially kicked off by a research paper by Islamic scholar Mufti Muhammad Abu Bakar, declaring bitcoin compliant with Sharia law. Mufti Muhammad Abu Bakar, who works as a Sharia adviser and compliance officer at Blossom Finance in Jakarta, released this new research on Tuesday, 10 April.
The paper was careful to qualify that national law supersedes Islamic rules on ‘customary currency’, and that Muslims should therefore treat bitcoin as their local laws do.
With 1.6 billion members, Islam continues to be the fastest-growing religion in the world. With bitcoin now arguably qualifying, it could open up the cryptocurrency to a massive new market.
Whatever the initial cause, the results were astounding. The question now is, can bitcoin sustain this rise?
Where to from here for bitcoin?
The sudden overnight price rise has reversed some of the losses bitcoin suffered in 2018. The trend has generally been downward for the first and most famous of the cryptocurrencies, since December 2017.
This sudden rise was made on extremely volatile trading, with short traders being forced to reverse their trades. That contributed to a sudden rise, but may not be sustainable long term.
The price action over the days and weeks to come will tell us whether this represents the beginning of a reversal in trend, or merely a blip on the way down.
For Money Morning
PS: Money Morning’s resident crypto expert Sam Volkering believes that cryptocurrencies represent a revolution that will transform the world of finance, technology, and dozens of other industries. Despite the recent volatility, he argues that long term, crypto will change the world more than the internet has over the last few decades. And bitcoin may not even be the most important of those cryptos. To explain why, he’s written a free report titled ‘Five Things You Must Know about the Real World of Bitcoin and Cryptocurrency’. Download your free copy here.