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Pump-and-dump? Bitcoin surges through $7,500 before investors cash in
The price of bitcoin broke through $7,500 in trading over the weekend, its highest level since August — but then it fell below $7,000 in what some are suggesting may be a classic case of a pump-and-dump scheme.
Bitcoin has been a roll this year after hitting a low of $3,360.53 on Feb. 5. Bitcoin started to recover from that point when it broke $4,000 on March 31, $5,000 on April 2 and then $6,000 on May 9. By 11 a.m. EDT today, it peaked at $7,542.84 but then dropped to $6,851.24 at 8 p.m. with its price before recovering slightly to $7,068.59 after 11 p.m.
As is often the case with bitcoin price rises, there’s no hard reason for its current surge, its largest price increase over a week this year and its biggest price surge since the glory days of price jumps in 2017.
That hasn’t stopped some speculating on the price increase. NewsBTC suggested that the price increase reflects improving buying sentiment and technical forecasts. It also noted that news of Fidelity Investments Inc. entering the bitcoin market along with others such as TD Ameritrade Inc. may have also played a role.
Bloomberg, on the other hand, didn’t even try to speculate on why bitcoin surged but instead pointed out negative news such as the hacking of Binance and the legal action against Bitfinex and Tether.
Hacked.com arguably got closer, calling what has occurred what it likely is: investors pumping and then dumping bitcoin for profit. It noted that bitcoin’s rise didn’t happen with most other cryptocurrencies aside from Ethereum.
A pump-and-dump scheme involves someone artificially inflating the price of a security in order to sell it at the higher price. Although it may not be illegal with bitcoin given that the cryptocurrency is not a regulated security, there’s no other logical explanation for bitcoin both surging and diving rapidly in price over the last 24 hours.
There is a positive for bitcoin going forward: The price post-selloff still higher than two or three days ago. That reflects how bitcoin nearly hit $20,000 at its peak in 2017 as well with a very similar pattern: price hikes followed by declines that settled at levels higher than days or weeks before.
Image: 30478819@N08/Flickr
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