Bitcoin broke above $40,000 on Wednesday and headed for an attempt to break its months-long range as short sellers backed out and traders relied on recent bullish movements from Bitcoin.
Bitcoin recently gained 1.7% to $40,149 while the second largest crypto, ether, rose 1% to $2,328. Bitcoin is in a whisker that increases by its 100-day average.
Moreover, despite increasing regulatory scrutiny in the crypto sector, the top crypto continued moving up. One notable example of this heightened scrutiny can be seen in how the largest exchanges are removing leverage functions.
Regulations Mount Up Against Crypto
One of the recent adjustments made by Binance was to reduce its high leverage from 125x to 20x. Traders that utilise leverage to develop businesses may increase their offers by enormous quantities. The negative may of course also be compounded, which leads to massive liquidations even for experienced traders.
Crypto FTX, headed by CEO Sam Bankman-Fried, has reduced the number of tap leverage users. Bitcoin market watchers speculate on Monday’s price rise stimulus, and some of the experts believe that a little squeeze of highly leveraged traders may have contributed to upward price pressures.
In addition, crypto is seeing scrutiny from the US Senate. At a Wednesday Senate Banking Committee hearing, U.S. Senator Elizabeth Warren (D-MA) cautioned about the dangers of cryptocurrency.
Bitcoin Remains Unaffected by Recent Negative News
Over the last 24 hours, Bitcoin and other cryptocurrencies have increased significantly. Bitcoin, the biggest cryptocurrency in the world, traded for 15 percent price increase at $39,189 at press time. Some analysts believe Bitcoin’s recent rise comes from a short squeeze.
Short liquidations — bearish transactions where the principle was wiped from margin calls – began about 9 p.m. ET Sunday, helping to enhance the market feeling and increase the price of BTC.
A short squeeze is an uncommon situation that causes a stock or other tradeable security’s price to quickly rise. A short squeeze occurs when a securities has an unusually high number of short-sellers holding holdings in it. When the price suddenly rises, the short squeeze starts. The situation plays out when a large number of short sellers decide to reduce their losses and leave their holdings.
Short-sellers bail out to reduce their losses, causing a short squeeze to accelerate a stock’s price increase. Contrarian investors attempt to predict a short squeeze by buying companies with a high level of short interest. Short-sellers and contrarians are both taking calculated risks. Shorting or purchasing that asset offers extra benefits for a smart investor.