In a recent blog article I tried to make sense of a particular plunge in the price of bitcoin that happened on February 23, 2026. This blog article looks at the opposite — a particular surge in the price of bitcoin that happened two days later.
In that previous blog article I talked about the fact that sometimes, a cryptocurrency will be “thinly traded” meaning that there are not very many buyers or sellers participating in the market for that particular coin. When the trading in some particular asset such as a cryptocoin is thin, a consequence is that any particular big trade is likely to lead to a notable shift in the price of that asset. It might then take some hours or days for subsequent trading to bring about price corrections that return things to whatever overall trend exists for that asset.
The previous extreme price change that I discussed, that happened two days ago, was a plunge. Some seller, or perhaps a couple of sellers, tried very hard to unload some bitcoin. To do this, they had to accept whatever lower price some would-be buyer was willing to pay.
Today’s extreme price change went the other way. It was a surge in price. What happened today is that some seller tried very hard to purchase some bitcoin. Again we are able to make use of the very helpful web site bitcoinity.org. As you can see, at about 6PM some would-be buyer went to the exchange called Coinbase and tried to buy about 1300 bitcoins. At about the same time, some would-be buyer went to the exchange called Bitstamp and tried to buy about six hundred bitcoins. The result was a surge of about 3% in the price of bitcoin, from about $64K to about $66K.
Just as in the extreme price swing that I discussed that happened two days ago, we see that at the time of the transaction, the asset was thinly traded. The ratio of trading volume to market capitalization was only 3%.
It crosses my mind that anybody who is considering buying or selling a lot of bitcoin in a short period of time might go to each of several exchanges to see what kind of price he or she might get. Indeed in the case of this particular surge, it crosses my mind that maybe the buyer was both the Coinbase buyer and the Bitstamp buyer, spreading the purchase out over two exchanges.
The overall points that I made in that previous blog article apply equally here:
- My view is that the thoughtful investor should limit one’s bitcoin holdings to only a small percentage of one’s overall asset allocation. Maybe a percent or two, but not more.
- I also think a person should not hold any bitcoin at all unless one is prepared to take a long view about it.
- It often happens that bitcoin is thinly traded, and when this happens, a single transaction can lead to a big change in the price of bitcoin.
- The volume-to-market-cap ratio can tell us when the trading is “thin”.
- In my view, it is not a good use of time or energy to fixate upon any particular big price change if it happens at a time of thin trading.
- In my view, if indeed ownership of bitcoin is right for any particular person (and there are surely many people who should avoid owning any bitcoin), I think the best approach is merely to “buy and hold”.
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