What happened
Today's been an absolutely incredible day for Shiba Inu (SHIB 6.16%) investors. This favorite of speculators has surged 38.1% over the past 24 hours, as of 10:15 a.m. ET.
Interestingly, there are a couple of drivers behind today's rise that investors may want to take note of. First, derivatives-linked liquidations (this time on bets mainly against Shiba Inu) have once again driven volatility, this time positively, for this meme token. Recent reports suggest that forced liquidations cost traders nearly $10 million, this time on traders betting the price of SHIB would fall. Approximately three-quarters of all SHIB futures are short as of the past 24 hours. As short positions get liquidated, forced buying drives up the price of a given token, often creating a squeeze-like atmosphere.
Image source: Getty Images.
Secondly, this token's surge today follows a weekend rally driven by news that fast-food chain Welly's will be partnering with the dog-inspired cryptocurrency. This co-branding agreement provides for the issuance of NFTs, driving increased interest in this meme token once again.
So what
Forced liquidations have driven much of the volatility we've seen over the past few weeks in the crypto market. Much of this volatility has been to the downside, with bullish investors getting their futures contracts liquidated as a result of spot price declines of late.
However, the inverse effect of having short positions liquidated has done the exact opposite, amplifying recent rallies. Shiba Inu is now up more than 50% over the past week alone, and has nearly doubled from its Jan. 22 low at the time of writing.
Now what
Shiba Inu's recent fast-food partnership is likely more of a headline-grabber than anything else. Like other meme tokens, real-world partnerships and marketing deals can boost this token in the short term. However, because they're short-term trading vehicles, it's clear that there's a lot of leverage underneath these tokens in terms of derivatives trading that is likely to amplify price moves.
For Shiba Inu traders, this means more volatility can be expected on the horizon. Right now, this extreme volatility is to the upside, providing investors with what could be another impressive rally underway.
How far Shiba Inu can run from here remains to be seen. However, with history as our guide, anything's possible with this token.
