The Bitcoin price leaped last night, adding some $400 in just 20 minutes — but details of the price spike suggest it may be short-lived.
This scheduled downtime forced the liquidation of a large number of short positions on the BitMex exchange, indicating a so-called short squeeze.
The short squeeze (which happens when the prices rise, forcing short sellers to buy more to cover their positions and creating a domino effect, pushing prices higher) comes as the number of short orders placed on Bitcoin is nearing an all-time high, according to data from cryptocurrency exchange Bitfinex.
Short sellers, both in cryptocurrency and in traditional financial markets, bet against the price of an asset or security due to the belief the price will fall. If it does fall it can be then bought back at a lower price to make a profit.
If the price rise is directly attributable to BitMex going offline, we could see a quick correction this morning as trading resumes and the price has already begun to slide.
Bitcoin hit $6,812 shortly after 2am GMT (up from $6,465) but has already fallen back to trade just below $6,700.
Meanwhile, investors will be looking towards the decision by the SEC into the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF, expected by the end of the day.
The Bitcoin price just last week dipped below $6,000 for the second time this year as the sell-off that’s been rumbling on since January added pressure to Bitcoin and most other major cryptocurrencies.
Bitcoin’s market capitalization added some $11 billion in the short 20 minute period taking the total value of all cryptocurrencies to $221 billion, according to CoinMarketCap data.