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Screenshot of a breaking news alert e-mail from Q2 2017
It has been a very busy and volatile weekend for Bitcoin prices.
After climbing steadily since the last week of November, Bitcoin prices really caught fire on Friday, rising steadily throughout the day about 10% to hit $476 soon after the weekend clock struck midnight Friday night – the highest level Bitcoin has seen since August 2014.
But the party didn’t last long. Just after 4:00am GMT Saturday Bitcoin prices fell off a cliff (see chart below), giving back more than all of Friday’s gains to just above $400, before settling in the $425 range where they remained most of Saturday and into Sunday.
So what gives?
Bitcoin prices past two days. Up, then back down. Source: BitcoinCharts.com.
Not much really.
Friday was a very volatile day in the capital markets generally, with the risk-off environment seeing equity indices (DJIA, S&P500, NASDAQ) all down in the 2% range, Crude Oil down (another!) 3%, and petro currencies (e.g. Canadian and Australian dollars) each down further to new lows.
For some unexplained reason, Bitcoin has become something of a safe-haven investment lately and Friday saw momentum investors take full advantage by putting their stock (literally) into Bitcoin as other popular investment vehicles were in selloff mode.
The downside of momentum investing, of course, is that a purely momentum-driven market is typically short lived. When the momentum ends, it is often a case of hot potato – with investors looking to lock in momentum gains and get out as quickly as possible.
And that is exactly what happened very early Saturday. Someone big decided it was time to sell, and a whole big flock of Bitcoin lemmings followed. In the space of less than five minutes as many in Europe were still asleep, Bitcoin dropped from about $470 to the $420 range. No warning.
For those investors who can stomach the volatility Bitcoin will likely remain a popular in-and-out momentum trade. But for the rest of us, it is likely a little too hot to handle for the moment.