A visual representation of the digital currency Bitcoin sinks into water on August 15, 2018 in London, England. Most digital currencies including bitcoin, (BTC) ethereum, (ETH) ripple (XRP) and stella (XLM) have seen a dramatic fall in their prices throughout 2018 amid a mass sell-off. (Photo Illustration by Dan Kitwood/Getty Images)
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.
The jump in bitcoin price came ahead of a decision expected today from the U.S. Securities and Exchange Commission into two proposed bitcoin exchange-traded funds (ETF).
However, bitcoin has been trading sideways all week ahead of the decision, with little to no indication investors were about to pile into bitcoin or other cryptocurrencies.
The bitcoin price jump pushed it over $6,600 for the first time in weeks.CoinDesk
Many observers noted the sharp rise in the bitcoin price happened just after major bitcoin and cryptocurrency exchange BitMex went down for scheduled maintenance at 1am GMT.
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 latest wild swings in the bitcoin price may do more to dissuade regulators, who have previously pointed to bitcoin's volatility as a reason to deny ETF approvals.
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.
The price spike happened very shortly after major bitcoin exchange BitMex went offline for maintenance.Twiiter / @CamelBus_
Meanwhile, other major cryptocurrencies including ethereum, ripple, bitcoin cash, EOS, stellar and litecoin, all added between 4% and 8% following bitcoin's rise.
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