With the price of bitcoin appreciating nearly 20% in May and breaking past $500 for the first time since 2014, it's safe to say the digital currency is once again back in the mainstream spotlight as an investment opportunity.
However, what may be most notable is that the gains took place amid strong overall sentiment. Data reveals the gains coincided with high long-short ratios and other indicators that sentiment is turning strongly bullish as we enter the summer months.
But, while May's price rally may seem impressive due to the substantial media interest it's achieved, it was only the fourth-largest monthly gain in the last year, CoinDesk USD Bitcoin Price Index (BPI) data reveals.
As recently as February 2016, bitcoin experienced a larger monthly increase, when it posted a gain of 18.92%.
By the numbers, May's monthly gain was slightly lower than that of February's, when bitcoin prices rose from $367.14 to $436.61, an 18.92% increase. The May rally also fell short of November 2015's monthly gain, when prices climbed 20.64% from $312.43 to $376.91.
Overall, the digital currency climbed 18.35% in May, opening at $449.33 and closing at $531.80, the second consecutive month in which it posted gains.
Perhaps most notable was the concentration of the price movement, however. The digital currency captured its entire monthly increase during the last five trading sessions, which spanned 27th May through 31st May.
But how bullish were bitcoin traders in May?
Long volume always exceeded short volume, figures provided by full-service bitcoin trading platform Whaleclub show.
A sampling of monthly data performed by Whaleclub shows that the lowest long-short ratio - as measured by position size - was 52%. In addition, confidence, meaning the percentage by which a particular day's position sizes were larger than average, was at least 44% over the course of the month.
Additional Whaleclub figures show how optimistic market participants were in the last five sessions of May, when prices surged nearly 20%.
Long-short ratios reached at least 89% for nearly every session during this time, while confidence hit at least 80% every day except 31st May.
Volatility - measured on a trailing week and trailing 30-day basis - was modest for much of the month, but picked up significantly during the end of May, an ARK Invest analysis of BPI data reveals.
Trailing week volatility was slightly higher between 20th May and 27th May, registering 2% every session except one. During the last four trading sessions, this measure surged, reaching 4% every day.
A broader measure, 30-day trailing volatility, started off at 1.28% on 1st May and then generally pushed higher during the month, reaching 2.44% on 31st May. This measure reached its highest point of the month on 28th May, when it hit 2.46.
It is worth noting that both 30-day and weekly volatility were higher in May than they were in April, but they fell short of the figures observed in January.
On 24th January, 30-day trailing volatility reached 4.84%. While this figure was nearly twice as high as 31st May's 2.44%, it was more than six times the 0.73% reached on 17th April.
As for why bitcoin rose nearly 20% in May, expert opinions were mixed.
Tim Enneking, chairman of cryptocurrency investment manager EAM, told CoinDesk that he believes the trigger for the specific timing was the attention drawn to the ecosystem by Ethereum, and its alternative digital currency ether.
"Once BTC started to rally, lots of people piled into it, which created further gains," he said.
Petar Zivkovski, Whaleclub's director of operations, also spoke to the relationship between ether and bitcoin, telling CoinDesk that the prices of the two currencies enjoyed an "almost perfect" inverse relationship during May.
"This indicates that the market has positioned both currencies as pure competitors - should one asset be seen as succeeding, the other is seen as failing," he noted.
Daniel Masters, chief investment officer at Global Advisors pointed to other causal factors, stating that the upcoming decline in rewards for bitcoin miners on the network likely played a role. He emphasized that not only will this event take place soon, but that it will most certainly have consequences.
"The bankruptcy of KnC is a clear signal that the economics of mining are being affected by the halving - I believe the price will be, too," he added.
As for where experts believe ether prices will move going forward, experts matched overall market sentiment in their optimism.
Chris Burniske, analyst and blockchain products lead at ARK Invest, weighed in on bitcoin's future price movements, emphasizing that the currency's 30-day daily volatility was far lower at the end of May than it was at its high on 24th January.
"Since we ended May with a trailing 30-day daily volatility of 2.44%, bitcoin is still less volatile than it was at the beginning of the year, but it will be really interesting to see how it behaves going into the halving," he told CoinDesk.
While Burniske singled out liquidity as a key variable when providing commentary, and Adam White, vice president of business development and strategy at Coinbase, elaborated further on this factor in a recently released whitepaper.
Should the digital currency continue to attract more investor dollars, it could become increasingly investable through greater liquidity, he said.
Another factor that could potentially help bitcoin going forward is people finding new and innovative ways to utilize the blockchain, the electronic ledger that holds all the digital currency's transactions.
Jack Liu, chief strategy officer of OKCoin, weighed in on this matter.
"If the attention returns to the bitcoin blockchain for a prolonged period due to halving, a scaling solution, and further use cases of the public blockchain, then markets look optimistic," he told CoinDesk.
At any rate, all eyes will be on the bitcoin community to see how effectively it harnesses blockchain's applications, what progress it makes toward solving its perceived scaling challenges and how it will react to the decline in rewards scheduled to take place in July.
Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.
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