The price of bitcoin has begun to test $600 following a high-profile exchange hack that left a wake of uncertainty for traders last week.
Bitcoin prices reached a high of $598.64 this weekend, but since then have largely traded tightly in the $560 to $580 range, CoinDesk USD Bitcoin Price Index (BPI) figures reveal.
These figures were much improved over the low of $480 observed last week and come amid new transparency from Bitfinex, the troubled exchange that lost 120,000 BTC (worth more than $60m) in a theft that has to date attracted ample mainstream media attention.
For traders, however, it’s the potential recovery from the subsequent 20% decline that is starting to become the biggest topic of interest.
Analysts were quick to compare last week’s drop to one observed earlier this year when high-profile Bitcoin Core developer Mike Hearn exited the project, prompting sharp losses in the digital currency’s price.
Tim Enneking, chairman of cryptocurrency investment manager EAM, was keen to highlight that the Bitfinex hack in and of itself did nothing to change bitcoin’s perceived value among traders, even if general public perception could be impacted.
Rather, he expects traders to see this as an opportunity.
Enneking told CoinDesk:
“It’s logical to see a temporary drop in price, but it’s also logical that a relatively short period of time will see a recovery and another test of $800.”
Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub, described bitcoin’s price recovery as a mean reversion, stating that the price declined “too quickly” following the hack.
To Zivkovski, the decline was primarily caused not by traders who had given up on bitcoin’s value, but on margin calls for long positions held by those who were “surprised by the hack and did not have much reaction time”.
Because the Bitfinex hack helped trigger fear and uncertainty, the BTC/USD pair plunged below $500, Zivkovski said.
He emphasized that the pair recovered nicely from its lows below $500, a sign that speaks to market confidence.
Enneking further spoke to how bullish wagers helped cause this rise, noting that “we have been strongly leveraged long since the low $500s”.
This robust sentiment coincided with bitcoin’s rise from their post-hack low of $480 on 2nd August to more than $580 on 4th August.
While Zivkovski and Enneking spoke largely to market sentiment, Arthur Hayes, CEO of bitcoin leverage trading platform BitMEX, said that Bitfinex’s response has played a role in buttressing bitcoin prices.
“It seems that Bitfinex will not choose the bankruptcy route which would have been very price negative,” he explained.
Hayes also spoke to how Bitfinex’s expected reopening will likely help provide support for bitcoin prices.
“Bitfinex is expected to reopen in the coming days, once they allow trading many traders will attempt to purchase bitcoin with any dollars they have on the platform and withdraw,” he stated, adding:
“That will push up the bitcoin price on Bitfinex and drag the rest of the market up as well.”
Zivkovski emphasized that market observers should get greater clarity on the effects of the exchange’s hack soon enough.
“Price action over the next few days will further elucidate the true impact the Bitfinex hack has on the market.”