Crypto-spike: what’s happening in digital currencies?

Cryptocurrencies returned to headlines recently, after the price of Bitcoin, along with a handful of other cryptocurrencies, unexpectedly spiked, raising the question: is the market for digital currencies returning to life?

Where caused the spike in activity?

A good question; and it’s hard to say. It’s become a point of speculation in markets, with a hard and fast answer, as always seems to be the case for cryptos, hard to find. Some technical factors probably came into play – a short squeeze followed by momentum buying bidding-up the price. The actual catalyst is something of a mystery: explanations range from a general return of risking in global financial markets, to an April Fool’s joke gone wrong.

A return of crypto-mania?

Unfortunately for crypto-bugs, probably not. While cryptocurrency markets are filled with the true-believing, HODL types who vouch for cryptocurrencies extraordinary upside potential, the consensus view is the mania that drove the price of cryptocurrencies to astronomical highs in late-2017 more-than-likely won’t return. Although blockchain technology has plenty of advocates, and a de-centralized currency possesses intellectual merit, that rise in crypto prices, especially that of Bitcoin, was likely more a reflection of a speculative-bubble than cryptocurrencies fundamental value.

How can you trade crypto-volatility?

Just because the price of Bitcoin is unlikely to fly to $US100,000 any time soon, as JP Morgan CEO Jamie Dimon once sardonically suggested during the crypto-boom, that doesn’t mean cryptocurrencies will disappear -- and better yet, can’t be traded. It’s not for the faint of heart, and relatively lower liquidity and higher volatility means prudent risk management is paramount, but many crypto-currencies become two-way markets, meaning CFD traders can profit from both rising and falling prices.

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