Bitcoin (BTC/USD) spiked to $280, its highest level since August 6, following the European Court of Justice (ECJ) ruling exempting bitcoin purchases from value added tax (VAT).
Bitcoin gained 4.9% over the course of 6 hours, which wouldn’t have been so newsworthy a year ago but is an outsized jump in today’s trading environment. It has since come off its peak, shedding 2% to $274.50.
The rise thus easily broke the $273 resistance point, which had provided a tough line of defense during the past week. At its peak, bitcoin was 16% above its 50-day moving average (MA).
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Traders, somewhat speculatively, increased their buying in the wake of the ECJ ruling. Not only does the decision make it more affordable to buy bitcoin, but it also makes bitcoin seem more like a real currency. Such decisions ideologically appeal to many of the Bitcoin community’s passionate members. However, it is difficult to model how exactly the decision increases bitcoin’s intrinsic value, which in general, is a formidable science.
Excluding today’s gains inspired by the ruling, bitcoin has still put on one of its most impressive runs in recent memory. Unlike during the Greek debt crisis in early July, gains have not been stimulated by speculative buying driven by some known news item. The gains have come slowly and steadily- at a more modest pace than many US equities.
However, it has become increasingly common for bitcoin to harshly reverse once a speculative peak is achieved. Traders rush to the exits as they attempt to preserve profits, and often, all the cycle’s gains are eroded.
Litecoin (LTC/USD) hasn’t really budged from $3.05, resulting in the LTC/BTC rate falling back to 0.011.