Is this Bitcoin Rally Just a False Flag?

The world was taken by surprise this past week when BTC surged above $8000 for the first time in weeks. On 4/12/18, BTC shot up an incredible $1000 in only 30 minutes, one of the fastest price increases ever recorded in such a timeframe. Currently, the price hovers just under 8k, and the crypto space is on fire with speculation that the long bear market is finally over.

But are we really out of the woods? Let’s examine what may have caused this recent spike, and determine whether it’s time to pop the champagne and celebrate, or if this all just a mirage before yet another drop.

First, what happened on 4/12?

There are a couple different theories about what triggered this. In no particular order, they include:

• Institutional money getting in on the game: world renowned firms like Soros Fund Management have announced this past week that it will begin trading cryptocurrencies,in spite of Soros himself dismissing cryptocurrencies are recently as January. Venrock (the venture capital fund owned by the Rockefeller Foundation) also announced a partnership with CoinFund.
• Short squeeze: Some influencers in the crypto space have speculated that market makers and whales are manipulating the price to create a short squeeze, a scenario in which a perceived bullish turn causes traders intending to short Bitcointo freak out and buy more in order to prevent losses and maintain their position. In doing so, they drive up the price.
• Some are even claiming that a Muslim scholar declaring cryptocurrencies to be compatible with Islamic law was a factor. The idea of the Islamic world (1.7 billion people) getting into Bitcoin could have been enough to get the wheels of upward speculation spinning in many people’s minds.

It may very well have been a combination of these things. Regardless, the most important question is will this bump actually last, or are we just going to go down again?

Don’t Celebrate Just Yet
As I’m typing this right now, the market appears to be cooling off, as I suspected it might. While many aspiring lambo owners are probably scratching their heads in confusion right now, one of my favorite sources offers an interesting explanation for why this might be happening.

According to MagicPoopCannon (yes, I know, stay with me), what we are seeing here is a “false flag pattern”. This is characterized by flagpole patterns followed by rising consolidation phases extending higher than the flagpole, which then breaks down.

(Check out this helpful article from Investopedia for a more detailed explanation of bearish flagchart patterns)

While we have broken this brutal descending channel, it’s easy to forget with all the current hype in the news that this already happened back in February, and that didn’t stop us from ultimately falling to the $6500 range.

It’s also easy to forget that we are still recovering from what was literally the largest bubble in human history back in December.It is very possible that this correction is not over yet. While I’m certainly happy with seeing green like everyone else, I’m cautioning everyone against being overly optimistic; we’ve already seen more than a few downward flags in recent weeks— don’t be surprised if we’re back in the red this coming week.