Did an April Fools joke cause bitcoin to breach $5K?

Matt Raebel

Matt Raebel

Associate Editor

At one point in the 2013 comedy “The Wolf of Wall Street,” Matthew McConaughey’s character Mark Hanna – a slick, coke-snorting stockbroker – tells Leonardo DiCaprio’s character, “Nobody – I don’t care if you’re Warren Buffett or Jimmy Buffett – nobody knows if the stock is going to go up, down, sideways or in circles.” While many in the financial services world might disagree, we can probably all agree that this accurately describes the current crypto market. Just replace “the stock” in that sentence with “bitcoin.”

The crypto markets recently saw an unexpectedly huge spike in trade volume. At approximately 12 AM (CST) on April 2, the price of bitcoin shot from $4,200 per coin to around $4,550 in one hour. By noon on April 3, it was trading steadily at around $5,000 per coin. That price was still holding as of April 5.

“So, Mr. Buffett,” you may be thinking, “why did that happen?”

Many people seem to believe it was caused by an April Fool’s Day joke.

On Monday, April 1st, Rachel McIntosh published a fictitious story in Finance Magnates that said the VanEck SolidX Bitcoin Trust and Bitwise would be launching bitcoin ETFs in early May, “following an emergency meeting at the SEC held Saturday.” Although it was April Fool’s Day, and the words “Happy April Fool’s Day” were clearly embedded in the last paragraph of the story, the article was convincing in part because of another Magnates story published on March 29 that said the SEC’s decision on greenlighting the bitcoin ETF submitted by Bitwise for launch on May 1, 2019 was expected to be announced April 1st.  (The original article, unlike the current linked one, did not have the words “April Fool’s!” at the beginning of the article in brackets.) A day after the article was published (at about 1 AM CST, according to CoinMarketCap), bitcoin’s price broke past $4,800 and continued to climb throughout the rest of the week.

Bloomberg picked up on this, publishing an article entitled, “April Fools: Traders Chase Another Unexplainable Bitcoin Rally” on April 2nd. The article suggested the Finance Magnates piece may have been to blame but acknowledged that “no one knows why” this happened. Even the CEO of Binance, Changpeng Zhao, admitted on Twitter that he was “clueless.”

I’ll admit, at first I thought it was hilarious that an April Fools joke could have such an impact on the crypto market – because in my mind, of course it would. Sadly, this was probably not the case. There are plenty of people far more rational than Mark Hanna paying attention to these things, and they have offered a lot of far more rational explanations for what caused the bull run.

The Block’s Frank Chaparro wrote that there were a number of other factors that probably contributed more significantly to the price spike than the Magnates article, such as a wave of initial exchange offerings (IEO), which he wrote took “the market by storm.” Coindesk reported on April 3 that another factor may have been an automatic update to the bitcoin protocol called “halving” that isn’t even due to kick in until next year. According to the article, historical data shows that this “halving,” which is automatically initiated after a certain number of bitcoins are mined, usually triggers a bull run about a year before it takes place.

Hunter Horsley, the CEO of Bitwise, was also unconvinced that a prank could have such an effect. “It’s absurd to believe this market move is the result of confusion about the Bitcoin ETF filings,” he told CNBC. “Though ETFs and April Fools are topical, there are lots of reasons this is an unlikely explanation.” The most likely explanation, he said, was a 20,000 BTC order that took place across multiple trading venues (this was reported by Reuters). Brian Kelly, CEO of BKCM, told CNBC that the price boost had more to do with bitcoin reaching a price level that probably triggered a stop-loss trade – which could explain the mysterious order described in the Reuters article. Kelly also said that the crypto markets may have finally reached a turning point because “everyone who panicked and sold is already out” of the global crypto market.

Everybody loves a great story, like one about an April Fool’s prank that caused a massive spike in trading volume and price for a highly speculative asset. Yet, the truth is often more boring than the stories we like to tell each other and far less likely to compel readers of such stories to hit the “Share” button.


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