Update (1950ET): The third leg of today's massive surge in cryptocurrencies has lifted Bitcoin Cash up over 70% on the day, Bitcoin and Ethereum up around 20% and Litecoin up 35%.

Bloomberg reports that the surge at the start of Asian trading on Tuesday was likely triggered by automated software set up to execute a $100 million trade across three exchanges, according to Oliver von Landsberg-Sadie, chief executive officer of London-based crypto firm BCB Group.

"Some people are in the camp where algorithmic trading is a manipulative device, and others are of the view that they are a way to make markets more efficient," von Landsberg-Sadie said. "I am definitely of the second view." BCB Group helps clients place large algorithmic trades to minimize market impact.

The number of algorithmic crypto traders has jumped in the last seven months, with 17 algo or quantitative funds started since September, according to Crypto Fund Research. They account for more than 40 percent of crypto hedge funds launched during the period, the firm said.

Bitcoin and Ethereum both broke above their 200DMAs and extended gains and Bitcoin Cash has now blown thru its 200DMA...

It is clear that this is anything but an 'April Fools' joke as so many mainstream media types tried to shrug off the action. The big moves have occurred as European markets opened, as US markets opened, and now as Asian markets opened.

While there remains no specific headline catalyst for the moves, Jim Grant offers one potential clue, noting the nearly identical level of activity in tether, the purportedly dollar-backed crypto.

While bitcoin (with an aggregate market value of $86.3 billion) has logged $21.5 billion of trading volume in the past 24 hours, the much-smaller tether (market value: $2.1 billion) has registered $21.9 billion over the same period, according to data from CoinMarketCap.com. By comparison, ethereum, which sports a market cap of $17.4 billion, has seen 24 hour trading volume of $9.8 billion.

Bitcoin only has to go up $995,000 in the next 640 days or McAfee eats his dick pic.twitter.com/sTPxUtRYOM — Hipster (@Hipster_Trader) April 3, 2019

As CoinTelegraph's Ana Alexandre notes, Brian Kelly, the founder and CEO of digital currency investment firm BKCM LLC, said that the next Bitcoin (BTC) target is going to be $6,000, CNBC reported on April 2.

During an interview on CNBC’s “Futures Now” show, Kelly stated that “probably a reasonable target [for Bitcoin] is close to $6,000 for this move.” Kelly’s statement comes in the wake of a price surge elast night when the leading coin skyrocketed by over 15 percent and broke the $5,000 price mark for the first time since last November. Kelly suggested that the cryptocurrency market is finding its bottom:

“All indications that we have — whether it be fundamentals, technicals, the quantitative analysis we do — all suggest that we probably have at least started to put in the bottoming process. [...] What’s interesting about this move is it’s happening on improving fundamentals and improving institutional sentiment.”

Kelly further supposed that institutional investors are one of the main drivers of the cryptocurrency price upturn, saying:

“Even high net worth individuals, family offices, are starting to take a serious interest. There’s a couple major brokerage firms that are rolling out some custody solutions. So there’s quite a bid going on under the surface.”

According to CNBC, the price surge reportedly followed a 20,000 BTC buy across multiple exchanges, or 0.11 percent of the total Bitcoin supply of 17,620,525 BTC at press time.

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Update (0930ET) : Cryptos have legged higher once again...

With Bitcoin breaking above its 200DMA for the first time in a year...

As Nomura's Charlie McElligott observed: "things that make you go hmm", pointing out that the return of vol suppression by central banks (recall that in 2017 bitcoin was used by even conventional trading desks due to its massive volatility), and the resumption of speculative assets bubbles, has benefit cryptos which blasted off higher, with most rising above their 200DMA for the first time in a year.

As the Nomura strategist puts it "Funny what some excess liquidity and “wealth effect” (likely / particularly in Asia) can do for a completely spec "asset" like Crypto" and recaps the recent action:

The BGCI Bloomberg Galaxy Crypto Index is now +58.6% off the Dec lows

Bitcoin is +51.7% off Dec lows

Bitcoin Cash is +139.2% off Dec lows

Dash is +111.1% off Dec lows

EOS is +165.6% off Dec lows

Ethereum is +86.4% off Dec lows

Litecoin is +201.0% off Dec lows

Monero is +69.1% off Dec lows

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The CBOE may be regretting its decision to abandon Bitcoin futures trading this morning, when shortly after midnight Eastern time, bitcoin suddenly broke the calm that had blanketed the crypto space for over three months, when it exploded as much as 23% or $1,000 higher in minutes, rising briefly above $5,000, its highest level since November, and pushing the entire $160 billion cryptocurrency space sharply higher, with rival coins Ether, Litecoin also soaring, as did cryptocurrency-linked stocks including Remixpoint and CMC Markets Plc, as well as that old market favorite Riot Blockchain.

At its peak, the 23% intraday move, which added more than $17 billion to the value of digital assets, was the biggest since early 2014. Even after paring some gains, with bitcoin currently up just over 15% at $4,777.81, the daily swing was the biggest since the euphoric peak bubble days of late 2017.

Understandably, traders was keenly focused on identifying the catalyst behind the move although a clear reason for the sudden surge has yet to emerge. George Harrap, chief executive officer at Bitspark, told Bloomberg he’s putting “most things on pause” until the market settles down. His contacts in the Bitcoin community have yet to identify a catalyst for the sudden jump.

“The reason why? Anybody’s guess at the moment,” Harrap said, as analysts could not point to any specific news or developments in the cryptocurrency sector that could explain the mystery buyer’s big order.

Some of the potential triggers cited on trading desks and in social media included a sizable block of expiring puts, short covering by traders who had stop-loss orders around the $4,200 level and an April Fool’s Day story on a little-known online news site claiming that the U.S. Securities and Exchange Commission had approved Bitcoin exchange-traded funds, although that was quickly discounted as the gains persisted even after the story was discounted.

Oliver von Landsberg-Sadie, chief executive of London-based cryptocurrency firm BCB Group, said the move was likely triggered by an algorithmic order worth about $100 million spread across major exchanges - U.S.-based Coinbase and Kraken, and Luxembourg-based Bitstamp.

"There has been a single order that has been algorithmically-managed across these three venues, of around 20,000 BTC,” he said. “If you look at the volumes on each of those three exchanges – there were in-concert, synchronized, units of volume of around 7,000 BTC in an hour”.

Another possible reason: crypto vol has troughed, prompting renewed interest in the asset class by investors seeking volatility at a time when cross-asset vol has likewise collapsed.

Another theory: renewed interest in money "offshoring" by Asian and/or Turkish investors.

Of course, it may well be the case that with all central banks once again caught in a rush to debase their currencies and ease monetary policy, investor interest is once again turning to fiat money "alternatives."

Outsized price moves of the kind rarely seen in traditional markets are common in cryptocurrency markets, where liquidity is thin and prices highly opaque. So orders of large magnitude tend to spark buying by algorithmic traders, said CryptoCompare's Charlie Hayter.

As bitcoin surged, there were 6 million trades over an hour, Hayter said - three to four times the usual amount, with orders concentrated on Asian-based exchanges. “You trigger other order books to play catch up, and that creates a buying frenzy.”

To be sure, bitcoin susceptibility to unexplained, erratic price swings is nothing new and made it very popular among speculators, who are seeking a return to the glory days of 2017 when Bitcoin surged more than 1,400%. However, since its peak around $20,000 in late 2017, bitcoin suffered a 74% crash which eliminated much if not all of the froth in the former asset bubble.

Market participants say big buy orders in Bitcoin can often lead to outsized moves, in part because volume is spread across dozens of venues. Trend-following individual investors and short covering can also exacerbate volatility.

Of course, erratic moves such as this one have deterred institutional investors, whose concerns about cryptocurrencies range from uncertain regulation to exchange hacks and market manipulation.

“Bitcoin is still primarily retail-led,” said Craig Erlam, senior market analyst at Oanda Corp. in London. “It’s still a relatively unsophisticated area of trading.”

Predictably, the skeptics promptly emerged despite the sudden price gains which pushed the price of bitcoin back to levels last seen in November 2018 when the crypto broke down below a former support just above $6,000:

“Events such as today’s will probably be seen negatively, or viewed as this market doesn’t conform to the trading of traditional instruments,” said Dave Chapman, CEO of crypto exchange ANXONE. “We have to realize that this asset class is only a decade old, and it only started getting mainstream attention five years ago.”

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Below we present the full market analysis from Bequant seeking to explain the sudden move:

Last week we asked, “When FOMO?”, pointing to the market where Bitcoin was trying to consolidate above the key $4,000 level while also having to deal with expiring futures and options contracts. In particular, as we pointed out, decent size was noted at 3500 strike (puts). For those that are yet to be convinced of the importance that derivatives market has on the underlying, it is worth pointing out that last Friday was another record day for Deribit with more than $40mln BTC options traded.

The market is very unpredictable, the price action overnight is a testament to that, when Bitcoin rallied over 15% and reached the highest level since November last year. It really remains to be seen whether the gains will be sustained but the market, which is very much retail driven and highly leveraged, but the impact of FOMO is not to be underestimated…

Source: TradeBlock (5min Bitcoin price movement 02.04.19)

Still, looking into the future (June options), there are early indications that the market is turning more bullish, with plenty of interest noted at 6,000 strike (calls) where there is already OI of 2342.9 (delta 0.23).

Looking elsewhere, as pointed out by The Block, Tether (USDT) has experienced its highest daily volume since first being issued in 2015. According to data from CoinMetrics.io, on March 31, 2019, there were 38,150 USDT transactions processed. As a reminder, Tether Limited updated its website to clarify how its reserves are made up. The company now claims that each coin is backed by "reserves, which include traditional currency and cash equivalents and, from time to time, other assets and receivables from loans made by Tether to third parties."

Finally, something to ponder about…when Bitcoin futures were launched back in Dec'2017, the influx of hot money saw the prices rocket all the way to $20,000 but what is more interesting is that the futures curve was trading in contango. Since then, the curve has evolved and is generally trading in backwardation. However, Ethereum futures curve has been trading in contango for a long time and many argue that this is because of oversupply. Could it be that the natural state of the Bitcoin & Ethereum curves is a contango? As opposed to Keynes’ longstanding theory that the natural state of commodity markets is backwardation.