Markets Weekly is a column analyzing price movements in the global digital currency markets, and the technology’s use case as an asset class.
Bitcoin prices fluctuated significantly during the week ending 29th April, reaching a yearly high of $470 before falling below $440.
Global bitcoin prices enjoyed a strong rally at the beginning of the week, rising 4.2% from $451.10 at 12:00 UTC on 22nd April to a high of $470.16 at 18:00 UTC on 26th April. This price represented the digital currency’s strongest value since 7th December, 2015, when it reached an inter-day high of $470.88, CoinDesk BPI data shows.
Both a short squeeze and retail investors helped fuel this rally, Petar Zivkovski, director of operations at bitcoin trading forum Whale Club, told CoinDesk.
Zivkovski offered Whaleclub internal data backing up his assertion, stating that prior to the decline in price, his users reported a long-to-short ratio of 5.5 to 1.
Bull run ends
While bitcoin’s rally produced some quick gains, it lasted only a short while before the digital currency changed direction and started declining.
One factor was that trading volume during the run-up was “lackluster”, Arthur Hayes, co-founder and CEO of BitMEX, told CoinDesk. Hayes added that “volumes should have grown more as we kept rising, and they didn’t.”
“Without more pressure to sustain the rally, it corrected,” he said.
Bitcoinity data helps support his claim, as market participants traded 19.6m BTC during the seven prior days. This figure fell short of the roughly 30m BTC in weekly volume bitcoin repeatedly experienced when it traded within a range between $410 and $440.
By early trading on 27th April (between 12:00 and 14:59 UTC), the digital currency had fallen to a low of $450.87. Bitcoin then proceeded to break through the key psychological levels of both $450 and $440, dropping to a weekly low of $435.28 between 00:00-02:59 UTC on 28th April.
The sharp decline in bitcoin prices represented a long squeeze, which came easily since the long-to-short ratio was so high at the end of the rally, Zivkovski told CoinDesk.
“As large and smart players started exiting at the top after the price failed to make new highs, the rookie players who bought the top started to close their long positions aggressively to cut their losses,” he said, adding:
"This aggressive selling then continued to push price down, which continued to trigger stop losses for long positions (both automatic and manual) across exchanges.”
However, the week didn’t end on a sour note.
During the last few days of the week, bitcoin managed to recover some of its losses, surpassing $450 between 21:00-23:59 UTC on 28th April and then finishing the week at $449.86.
Ether’s slide continues
While bitcoin pushed higher, prices for ether, the native token on the Ethereum blockchain, declined, falling to 0.019 BTC (roughly $8) by the time bitcoin hit $470.16.
This figure was 13.6% lower than ether’s value of 0.022 BTC (about $10) at the start of the week, representing a decline more than three times the change experienced by bitcoin.
One market expert, Chris Burniske, told CoinDesk the negative correlation existed partially “due to the fact that ether is valued in terms of bitcoin”.
Burniske, analyst and blockchain products lead at investment management firm ARK Invest, stated that another major driver of this negative correlation was market participants moving capital from the former market to the latter, a trend he argued adversely affected ether.
At press time, ether managed to recover somewhat, ending the week with a closing price of 0.020 BTC (or about $9).
Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.