The recent surge higher in Bitcoin has been incredible even by its own high standards. The price has rallied by over $2500 in the past five days to post a new all-time high above 11400. But with no fundamental developments to support this move higher, there are growing signs to suggest the market is in a bubble.

Here’s 5 warning signs you must consider when trading Bitcoin:

1.Bitcoin has rallied 30% in the last five days and could be entering ‘bubble’ territory

Even by its own historical standards, the recent rally has been remarkable and sharp, leaving many experts to issue client warnings. 

The typical feature of a market bubble is as follows, and recent observations may suggest Bitcoin could be somewhere in between stage 3 and 4:

Stage 1: Displacement – where investors get excited about a new innovation i.e. Cryptography

Stage 2: Boom – the first signs of early price rises

Stage 3: Euphoria – new measures are touted to justify the recent exuberant price gains i.e. the fundamental validation

Stage 4: Profit taking – the smart investors start to exit en masse

Stage 5: Panic – prices descend rapidly triggering panic and exacerbating the moves, triggering a price crash

2. $45.5B added to market cap since Saturday 

This is a vast amount which could be unjustifiable based on core fundamentals.

3. Market cap has overtaken US stocks such as Mastercard, IBM and Disney

4. Relative Strength Index (RSI) on H4 chart is now above 90

This would indicate prices are heavily in overbought territory, meaning it could be highly susceptible to a sharp correction. 

5. Little by the way of positive fundamental developments to support the latest surge

Many of the recent gains have not been based on fundamentals apart from the recent announcement by the Chicago Mercantile Exchange (CME) developing a new Bitcoin futures market. However, the CME has now removed the launch date from its website, putting doubts on whether they are now reconsidering this offering.

For more short term analysis on the potential for a major Bitcoin correction, watch the video below:


Cryptocurrency CFDs are an extremely high-risk, speculative investment. You should be aware of the risks involved and fully consider whether investing in cryptocurrency CFDs is appropriate for you. You should only invest if you are an experienced investor with sophisticated knowledge of financial markets and you fully understand the risks associated with CFDs and cryptocurrencies.