What Caused the April 2018 Bitcoin Price Spike?
In early 2018 Bitcoin's price has been very volatile, dropping by as much as $2,000 (25%) in a single day on the 5th/6th Feb. Equally on the 12th April 2018 we saw the opposite of this, where Bitcoin's price went up by $800 in less than an hour (an increase of 11%).
This 12th April increase in particular had a lot of people curious as to what caused it. Was is some news event, or maybe market manipulation? Could it have been predicted? With headlines like "more bitcoin changed hands during this one hour than at anytime in Bitcoin's history" many people are interested in what happened. This guide will explain the various theories around this.
Positive News Affecting Price
A popular argument around this price increase is that positive news was the cause of it, that some big announcement happened at around the large spike starting at midday UTC on the 12th April 2018. Below are some specific events claimed to be the cause, and the time they were announced at (if the time was just before the price increase, this supports this argument strongly):
- Bitcoin now being considered compliant with Sharia law. This looks to have been first published on the 5th April, first published online on the 12th April. The earliest news post we found was Bitcoin.com at 8:55am UTC, and then on Cointelegraph and CCN from 5:30pm UTC onwards. It was posted on The Independent on the 13th.
- Winklevoss twins winning a crypto patent. This looks to have been granted on the 10th April, and first posted by CoinDesk on the 11th April at 10pm UTC, then by Crypto News India on the 12th April at 4pm UTC, and Cointelegraph on the 13th April.
- US tax season being over. This was posted on CNBC on the 12th April at 11:20pm UTC.
- Announcements around Wall Street preparing to inject "new liquidity" into Bitcoin. This was made on CCN on the 11th April at 6:50pm UTC.
- On the 6th April, a post was made on Bitcoinist that George Soros (a wealthy investor) may begin trading cryptocurrencies.
- There's a conference in Dubai called the 'World Blockchain Forum', we've seen some discussion that this may have been the cause so thought it was worth mentioning.
Based on the timing here you can decide which were most impactful, where if the news was announced after midday on the 12th it's unlikely to be related, and if it was announced just before midday on the 12th it's more likely to (although keep in mind that someone with insider knowledge on upcoming news may have acted on it before it was announced, leading the above dates/times to be less relevant).
Negative News Affecting Price
We've discussed positive news above, but you should be aware prior to this price increase many news websites were very bearish around Bitcoin (where they were suggesting its price may continue going down). A lot of the above positive news only became popular after the increase, so some argue that it was complete unrelated and that once crypto-related events hit popular news sites they're lagging real-time events (where sources like Telegram/Discord group chats and Reddit have more real-time data).
A good example of this is this post made on CCN, where 5 hours after the price increase they posted the headline "JPMorgan Trader Goes Bullish" (where bullish means they think the price will go up). There's nothing wrong with this, it's just good to be aware that this was posted after the increase in price, and so couldn't have caused the price increase.
Some other negative aspects to be aware of around news:
- News around wealthy investors like George Soros starting to trade crypto isn't necessarily a good thing, where if they decide to sell large amounts in one go it can cause significant price movements up or down like the one seen on the 12th April (this very well may have been caused by a single wealthy person/group). Some claim that wealthy investors are actually manipulating crypto markets intentionally.
- Many people are referring to positive news as if it's going to happen immediately, where billions of dollars will be invested into crypto tomorrow. But many of the sources in these articles are talking about long periods of time ranging from a few months to many years. This means in the comings days/weeks we could see big decreases in Bitcoin's price before any of this bullish behaviour. A good example is this post, where someone predicts Bitcoin's price in 2022; I mean we're crypto enthusiasts ourselves, but someone buying lots of Bitcoin just because of claims like this is very risky.
- On the 11th April a post was made around Canadian banks banning customers from buying crypto.
Technical Analysis Predicting Bitcoin's Price
Many people claim technical analysis is very effective in cryptocurrencies, others that it only works given certain market conditions, and others that it doesn't work at all. Regardless of your opinion it's a good idea to be aware of what technical analysts think - as many people do trade cryptocurrencies based on it.
Looking at a number of sources, the general consensus seems to be that on the 11th April technical analysis suggested that Bitcoin was very bearish, with some suggesting it's at a point where it could jump significantly up or down in price (some claiming that quarterly/weekly futures that were shorting Bitcoin being liquidated suggested an increase in price would be most likely).
After the price increase, technical analysts became much more bullish, suggesting that if Bitcoin stayed above various support lines it would continue increasing, with several warning that RSI analysis suggested it was being overbought (which could mean it's price would go down). Some mentioned resistance/support lines were 7800 USD for Bitcoin and 510 USD for Ethereum (e.g. points where if Bitcoin can't cross it would continue down, but if it gets past it would continue up).
Trying to work out what causes large price movements in crypto can sometimes be very easy, and sometimes very hard. On this occasion it's the latter, where there are various theories all with some degree of truth behind them. At the very least you're now aware of these theories, so you don't need someone else to tell you what happened, you can decide for yourself.
Often by following both news and technical analysts you can 'connect the dots' so to speak, where if a technical indicator says one thing and current news says the same then great! But if the news says something completely different, like say a popular coin has just been hacked when an indicator says the price is about to go up, you'll know to be more skeptical.
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