Bitcoin 'Short Squeeze' Bumps Prices to Nearly $37K as Spot ETF Hopes Strengthen
Over $62 million in bitcoin shorts were liquidated in the past 24 hours, contributing to higher prices.
Bitcoin (BTC) prices crossed the $36,000 mark for the first time since May 2022 on Thursday, extending the largest digital asset's rally.
Data shows just under $50 million in liquidations occurred in a four-hour period during early Asian trading hours, creating a “short squeeze” that drove prices higher. Shorts refer to bets against price rises in futures trading.
A short squeeze is an unusual condition that triggers a rapid price rise in any asset – typically beginning when the price jumps higher unexpectedly and short sellers exit their positions, leading to a buying flywheel.
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.
Liquidation refers to when an exchange forcefully closes a trader’s leveraged position due to a partial or total loss of the trader’s initial margin. It happens when a trader is unable to meet the margin requirements for a leveraged position (fails to have sufficient funds to keep the trade open).
The surge came as reports of the Securities and Exchange Commission (SEC) beginning talks with fund manager Grayscale emerged late Wednesday.
The firm’s Grayscale Bitcoin Trust GBTC, a regulated bitcoin product that holds billions of dollars worth of BTC, could be on track for conversion to a spot ETF – which is widely expected to be a milestone that could ease everyday investors' path into crypto investing.
Elsewhere, analysts at Bloomberg Intelligence double-downed on expectations of a spot bitcoin exchange-traded fund (ETF) approval in the U.S., reiterating a “90% chance” of a January launch.