Bitcoin, which surprised markets with a sudden surge yesterday, has continued to climb today.
The bitcoin price is fast approaching $7,000 per bitcoin, reaching $6,749 on the Luxembourg-based Bitstamp exchange earlier today after starting the week at under $5,000.
Bitcoin is up around 20% over the last 24-hour trading period, while other major tokens, including ethereum, Ripple’s XRP, litecoin and bitcoin cash, are up between 15% and 22%.
The bitcoin rally appears to be driven by large amounts of so-called stablecoin tether flooding the market.
Stablecoins, the largest of which is tether with a total value of $4.6 billion, are designed to mirror the value of the traditional currency they’re tied to with the creators of such coins generally claiming to hold the fiat equivalent of their tokens.
Over the last 48-hours some $120 million worth of tether has been minted, though the company behind tether said this was just an “inventory replenish” that had not yet been issued onto the market.
“It’s likely that speculators are already starting to jump in [to bitcoin] because they feel a big buy order may be coming,” said Simon Peters, bitcoin and crypto analyst at brokerage eToro.
The top ten bitcoin and crypto exchanges around the world have around $350 million of liquidity on their books, according to the Coinmarketcap liquidity index and Peters thinks that if the entire $120 million of new tether went into the crypto markets, it “could move prices significantly.”
“It will be interesting to see if demand continues to increase over the days to come and whether we start seeing some more prominent higher highs and higher lows in price action. This would give me more confidence that a recovery is on the cards,” Peters said, adding “we’re not out of the woods yet.”
Meanwhile, a Twitter bot that tracks major bitcoin and cryptocurrency trades, Whale Alert, has shown a number of large bitcoin transactions moving off exchanges to unknown wallets in the last 24-hours, suggesting some big investors have already taken advantage of the low bitcoin prices to buy more.
Bitcoin’s rebound yesterday came ahead of a broader recovery in traditional markets after a global sell-off last week due to the spreading coronavirus.
Global stocks and the price of oil have climbed today, suggesting a growing raft of central bank-led stimulus has finally satisfied investors and restored some semblance of market confidence.
However, countries and major cities around the world are increasingly going into shut down as governments desperately try to minimize the impact of COVID-19.
Some analysts have warned this market rebound could be what’s known as a “dead cat bounce” and markets, possibly including bitcoin and crypto, could soon fall back again.
“We’ve had a massive asset bubble that is now crashing,” said economic analyst Jesse Colombo via Twitter.
“Right now, most people are shell-shocked—they’re still in the denial phase. I believe we are primed for a powerful bull trap very soon [especially] with all these stimulus announcements. The market will probably bounce hard, which will suck in all the dumb money … Once investors get complacent and cocky again after a sharp market rebound, that sets the stage for the rug to be pulled out from under them, which will lead to an even more powerful crash than the first one.”