Bitcoin prices broke through $500 on 28th May, building on the previous day’s momentum to reach a level not seen since August of 2014.
The sharp increase notably helped extend the digital currency’s recent rally, which has provided a stark contrast to the relative stability bitcoin experienced in the last several weeks and for much of the first half of 2016.
Overall, Saturday’s move represented a 5.8% increase from its opening value of $473.47, a sharp rise that added to a 4.3% gain that took place on 27th May.
The digital currency first broke through the $500 level between 06:00 and 06:14 UTC on the 28th, eventually reaching a high of $531.70 for the day. At press time, the price had sagged somewhat, though prices remain $50 higher than just two days before.
During the run, prices hit their highest level since 21st August of 2014, when the price of bitcoin reached a high of $532.99 on the CoinDesk USD Bitcoin Price Index.
Robust Optimism
Aside from the price increases, however, there was no clear verdict on whether the run would continue.
Data provided by bitcoin trading network Whaleclub suggests long-short ratios reached record levels of 15:1 over the last few days, a figure that shows that sentiment is currently best described as bullish, at least for now.
“No clear fundamentals or catalysts are powering this rise in price,” Petar Zivkovski, director of operations at Whaleclub, told CoinDesk.
He said:
“Emotions have taken over: Traders have taken their rational lenses off and are buying with the expectation of selling higher in a short period of time. Inevitably, low-entry buyers will rush to take profit and price dumps will ensue.”
On the other side of the spectrum, market observers speculated that the effect of an upcoming decline in the amount of bitcoin paid to miners who process transactions on the network could fuel continued demand.
Such a sentiment was cited by OKCoin chief strategy officer Jack Liu who said that “deflationary pressures” could convince more buyers of bitcoin’s value long term.
Charles L. Bovaird II is a financial writer and consultant and the author of CoinDesk’s “Markets Weekly” coverage on the digital asset markets.
Follow Charles Bovaird on Twitter here.
Free bird image via Shutterstock; Chart via CoinDesk