TL;DR
Bitcoin’s spot price on cryptocurrency exchanges bolted to above the $37,800 level by Thursday. Spot Bitcoin ETF mania, as markets await an SEC approval, was likely in play here.
But a short squeeze forcing millions in liquidations by Bitcoin sellers also helped deliver the impact on major cryptocurrency exchanges.
Coinglass data reveals short sellers liquidated some $78.44 million in Bitcoin shorts over the 24-hour period from Thursday morning U.K. time to Friday morning. Moreover, investors liquidated a total of $118.14 million in BTC positions over that period.
A report on FXStreet notes around $50 million of the liquidations happened in a 4-hour window during early Asian trading hours. Furthermore, the note reported:
“Over $21 million of those shorts were wiped on futures exchange BitMEX, followed by OKX and Binance. This suggests the move could have been driven by market trades based in Asia, where these exchanges enjoy a relatively large user base.”
Bitcoin price’s tremendous momentum since the “Uptober” rally could continue to squeeze Bitcoin short sellers in November. This represents a potentially enormous tailwind of support for BTC bulls on crypto exchange markets.
A short selling position is a way to bet on the price of an asset decreasing. Traders usually do this by borrowing an asset to sell with the option to buy it back later at a lower price.
Ironically, a short squeeze can suddenly pump prices of the shorted commodity. As a note on Investing.com explained after Thursday’s BTC short squeeze:
“Defined as an unusual condition, a short squeeze leads to a high-pace price rise in any asset. It typically begins when the price jumps higher unexpectedly and short sellers exit their positions, leading to a buying flywheel.”
In simple terms, if the price of an asset increases suddenly enough, short sellers have to buy more of it to cover their positions. This results in the odd result of traders who are betting against the price of an asset rising, causing its price to rise even more.
Since BTC is a volatile investment prone to sudden and drastic price swings in either direction, there is a greater risk of shorting the world’s leading cryptocurrency.
Bitcoin seems to be on cyclical uptrend related to its four-year halving cycles. Furious anticipation of an SEC approval for a Bitcoin ETF meanwhile is throwing fuel on the fire of Bitcoin’s stellar price gains in this final quarter of 2023.
