Bitcoin, the flagship cryptocurrency, has reached a recent high of nearly $6,900 after adding about $400 in only 20 minutes, shortly after popular derivatives exchange BitMEX went into scheduled maintenance.
The price rise comes at a time in which the US Securities and Exchange Commission (SEC) is about to make a decision regarding two bitcoin exchange-traded funds (ETFs), the ProShares bitcoin ETF and the ProShares Short Bitcoin ETF.
The rise, according to most analysts, can be attributed a short squeeze that occurred thanks to scheduled maintenance on the BitMEX exchange. Soon after the company’s trading platform became unavailable at about 1 am UTC, the liquidation of a large number of short positions was forced as BTC climbed.
Short squeezes usually force short sellers to either buy more to cover their positions, or see their positions get liquidated. Since BitMEX was down for maintenance, sellers weren’t able to close their positions or add to them, leading to the liquidations. Short sellers essentially bet against the price of an asset, in this case bitcoin, believing the price will fall.
The short squeeze came shortly after the number of short sells surged this month, to come close to an all-time high it saw back in April, during a price rally. Although the squeeze helped bitcoin surpass the $6,600 resistance, it’s unclear whether it’ll stay above it.
The squeeze was seemingly planned, as analysts on social media noticed large bitcoin buy orders right after BitMEX went down for maintenance.
At press time, according to CryptoCompare data, the flagship cryptocurrency is trading close to $6,700. Although its price dropped from a high of about $6,880 after the exchange came back online, it’s still up about 3.2% in the last 24 hours.
Regulators have in the past pointed to the cryptocurrency ecosystem’s volatility as a reason to reject other bitcoin ETF applications. This episode, along with another short squeeze that saw short sellers lose $180 million in 20 minutes on the exchange in July, will likely not help persuade the SEC.
Meanwhile, most other top cryptocurrencies are up by between 1.5% and 4% thanks to bitcoin’s sudden rise. Notably Ethereum, the second-largest cryptocurrency by market cap, is down by 0.46%, as it still hasn’t crossed the $300 resistance. Earlier this month, BitMEX added ETH/USD contracts.
As some analysts pointed out, BitMEX’s influence over the market may now be too large, as traders taking advantage of its scheduled maintenance managed to pump bitcoin’s price by about 4%, helping it add some $11 billion to the cryptocurrency market cap.