Early Bull Market or Bear Market Trap?

For cryptocurrency investors, the more important question is whether this round of currency price increases is a bull market restart or a bear market trap.

Yesterday evening, the price of Bitcoin skyrocketed in just one hour. The price rose violently from around US$6,800 to a high of US$8,100. During the day, it grew by almost 20%. Led by Bitcoin, other virtual currencies also began a strong rebound, with the single currency even surging above 50%. Faced with the collective warming of the virtual currency market, many investors shouted that the “bull market is back.”

According to data from the CoinMarketCap website, Bitcoin’s market value increased by almost US$20 billion overnight, and the entire virtual currency market also experienced overall market growth. There was no “search” effect. With daily bitcoin transaction volume exceeding US$9 billion, billions of additional funds, not equity funds, should have flowed into the market yesterday.

In fact, during Bitcoin’s heyday, Bitfinex, a digital currency trading platform, also recorded a number of large purchases. With the increase in Bitcoin buying, many shorts were forced to close out their positions, further extending the market’s uptrend. Nick Kirk, chief data officer at Cypher Capital, also expressed his approval of the phenomenon. At the same time, he also believes that this sharp rebound is most likely a response to the removal of early regulatory pressure.

Pantera Capital Management, one of the world’s largest digital currency hedge funds, has said that Bitcoin has bottomed out. USD 6,500 is the lowest point for the Bitcoin bear market. Bitcoin will stay above this price for most of this year and may even surpass the record high of US$20,000 last year.

Fundstrat founder Tom Lee also expressed confidence in Bitcoin. He believes that the current P/B ratio and other indicators of Bitcoin are almost the same as in late 2014 and have formed an important technical correction. Based on this, he said that the value of Bitcoin could more than triple this year and rise to US$25,000 by the end of this year.

Historical data shows that Bitcoin did rise in the second quarter of the calendar year. In the second quarter of 2011, Bitcoin rose by 1964%, in 2012 – by 36.25%, in 2012 – by 61.98%, in 2017 – by 131%.

Of course, OTC Bitcoin volume is also showing signs of market recovery. Since March, Bitcoin trading volumes in Canada, Europe, Vietnam, Mexico and Vietnam have increased to record highs.

With the successive arrival of large financial institutions, such as the hedge fund giant Soros and the leading financial group of the Rockefeller family, the financial dimensions of the virtual money market will further expand.

However, it should be noted that while Bitcoin is currently on a strong uptrend, it is still in a downtrend channel and has yet to be effectively broken out. It remains to be seen whether the virtual currency market has really turned around. Investors should always be vigilant and pay attention to position management.

More importantly, the world’s major bitcoin markets, including the United States, have sought to create a regulatory framework. Regulatory uncertainty will inevitably have a greater impact on the short-term development of the virtual currency market. In the long run, an orderly, healthy market can go even further.