What happened

Shares of cryptocurrency mining company The9 Limited (NCTY -2.28%) were skyrocketing on Wednesday. As of 3 p.m. EDT, the stock was up a whopping 39%. Part of this might be because popular cryptocurrency Bitcoin was also up today. According to CoinDesk, the price of Bitcoin is up roughly 10% over the past 24 hours. The9 stock is often up when Bitcoin is up.

But considering that The9 stock is significantly outpacing its Bitcoin-stock peers, it seems there's something more going on.

Two people look at stock data displayed on a computer screen and papers.

Image source: Getty Images.

So what

Keep in mind that The9 stock isn't a good short-squeeze candidate. According to data from Nasdaq, short positions can be covered in a single day given its trading volume. In simple terms, the longer the days to cover, the greater the chances of a short squeeze. Despite this, there's plenty of chatter on various platforms talking about short squeezes and gamma squeezes (a variation involving options). Therefore, it seems that some still think this is a squeeze.

However, The9 is a very small company -- its market capitalization is just around $300 million. A stock this small can easily be pumped higher without the help of short-sellers covering their positions. So while it kind of looks like a short squeeze, today's upward move could just be short-term traders at work.

Now what

Adding to the evidence that this is just short-term trading activity, consider that The9 didn't release any news fundamental to the business today. Its most recent filing with the Securities and Exchange Commission came on Monday. At the time, it updated its shareholders about its shelf offering. The9 filed to sell new stock earlier this year on behalf of certain shareholders, diluting long-term shareholder value.

If today's skyrocketing stock price was the result of a squeeze, offering new shares to the market would make it easier to cover, ending the squeeze faster. That's the risk for short-term investors. But there's also risk for long-term investors. Over the past year, The9 has been diluting shareholder value by selling stock at an alarming rate. Its filing on Monday is a reminder that this is still going on.