Bitcoin wasn’t immune to April Fools’ Day jokes.
Another rumor was that Berkshire Hathaway CEO Warren Buffett — one of bitcoin’s most vocal critics — was diversifying into the asset class. As Founder and CEO of BKCM Brian Kelly put it, “there’s no way” that’s the reason.
A more realistic possibility is that bitcoin hit a key technical level, he said. Kelly poined to a key $4,200 price level triggering a stop loss trade. In bitcoin and other assets, traders will often set a certain level for when they automatically cover their short. It may also be a sign that fundamentals are improving and bitcoin is running out of sellers, according to Kelly.
“Everyone who panicked and sold is already out,” Kelly told CNBC Tuesday.
Arca Funds CIO Jeff Dorman, a former trader for Lehman, Merrill, Citadel said even if buying by trading algorithms kicked off the euphoria, that would have reversed quickly if investors were eager to sell. Instead, the rally boosted bitcoin to its highest level since November. This particular rally was caused by a “simple” imbalance of more sellers than buyers, he said.
“The large magnitudes of the moves in crypto make it more interesting of a story, but it’s not that different than any other asset class,” Dorman said. “Buyers outweighed sellers, and market makers felt the pressure so they took their markets higher, which triggered stop losses and liquidations, which added more buy pressure.”
Bitcoin prices have seen a relatively calm 2019 after a year of volatility. The cryptocurrency fell roughly 75 percent last year after climbing to a high of almost $20,000 at the end of 2017. It has has yet to recover anywhere near high that since and was trading near $4,728 on Tuesday afternoon.
But still, Dorman said some investors may be looking to get back in.
“The fact that every small dip has been bought immediately in the last few weeks shows that investors are not scared of sell-offs, they are hoping for them so they can buy more,” he said. “This certainly raises the near-term floor, but this sentiment can change on a dime too.”