April Fools: Traders Chase Another Unexplainable Bitcoin Rally

(Bloomberg) -- The rally that sent Bitcoin to its highest level since November lasted 60 minutes and may have started with an April Fool’s joke.

So even trading professionals who ditched stocks and bonds to chase riches in digital tokens expressed skepticism that the crypto winter is thawing.

"So many investors are still under water, so this not going to moon-shot them out," Lewis Fellas, chief investment officer at crypto hedge fund Bletchley Park Asset Management in Jersey, Channel Islands.

It doesn’t help that no one knows why Bitcoin, the most widely traded digital currency, jumped 21 percent between 5:30 a.m. and 6:22 a.m. London time, reaching $5.079. It pared that gain and was trading at $4,790, up 16 percent, at 12:15 p.m.

Zhao Changpeng, the chief executive officer of Binance, the world’s largest digital-asset exchange by trading volume, tweeted shortly after the move that he was "clueless" about what may have triggered it.

One theory is that a widely circulated spoof article stating the U.S. Securities and Exchange Commission had approved two Bitcoin exchange-traded funds drove prices higher, while others said it was caused by unwinding of short positions. Few pointed to any fundamental changes. Bitcoin plunged more than 70 percent in 2018 and has been moribund in 2019 -- until earlier on Tuesday -- putting the brakes on moves by established financial firms to move into the market.

“The bounce is not enough to reset crypto winter as we have no major new products and last year’s big breakthroughs are still in their nascent stage," said Julien Auchecorne, London-based chief operating Officer at XBTO International, a crypto trading and investment firm. “Sure it was a joke but it showed that the hope is for inflows and institutional infrastructure.’’

If the largest digital currency can remain above $4,000 for the rest of the week, it’s most likely to move steadily higher over the next few months to around $6,000 by mid-year, Fellas speculated. If the price trades around $4,500 for a while he will add a long position in Bitcoin this month, he said.

“It seems like we might have put the lows behind us,” said Fellas.

©2019 Bloomberg L.P.