Tuesday’s afternoon was the moment of the day when the popular cryptocurrency Bitcoin passed the $600 line, in a short period. For the first time in months, thanks to the rally, Bitcoin has broken above $7,000. On Wednesday it is still above that level, and it trades up 1.13% against the dollar to $7,397.86 at 7 a.m ET (12 p.m BST).
The rapid price surge from Tuesday was not talked about by immediately by any news, but the rise on a short squeeze was pinned by some market commentators.
An analyst with trading platform eToro, Mati Greenspan said to Business Insider during a phone interview on Wednesday that “The assumption is this is a combination of some sort of short squeeze and some new money coming in [to the market].”
When short sellers who make bets regarding bitcoin’s prices aim to take advantage of its declines, a short squeeze occurs because they are forced to buy bitcoin if they want to keep their positions. Depending on how these short bets go, they can either make profits or losses to their owners. And to close out their position, inventors are struggling to buy underlying assets.
In a Wednesday morning email regarding the market, the analysts from London Block Exchange made this statement:
“While over the past few months we’ve seen several stop runs aimed at liquidating longs, it seems these fast price moves are being propelled by the cascading reactions caused by short orders closing, i.e., those who were betting against the market being forced to exit their positions.”
“According to our calculation, roughly $180,000,000 [worth of short positions] were liquidated on BitMex during the 20+ minute period between BTC’s initial spike and when it topped off,” Cumberland’s note read.
“It doesn’t have the same processes and automation as most of the traditional assets. Certainly, there would be shorts getting liquidated.” Greenspan added.
Ian Kennedy is the newest contributor to Crypto Daily Gazette. He enjoys running, practicing minimalism and cooking. Ian is a graduate of Wesleyan University in Connecticut where he studied journalism, Arabic and international affairs. Ian mostly covers stories concerning emerging blockchain technology.