Several major cryptocurrencies started the week on a high note today amid a confluence of positive catalysts, including potential short squeezes, technical trading tailwinds, and -- perhaps most surprising -- geopolitical tailwinds from leading Chinese money management firms.
When all was said and done, as of the close of Monday's regular session, the price of Ethereum (ETH -5.65%) was up 9.1%, Bitcoin (BTC -1.77%) had rallied 3.8%, and Dogecoin (DOGE -7.29%) gained a little over 2%.
On a possible crypto short squeeze, technical tailwinds
According to Coinglass data this morning, the digital asset market has seen more than $176 million in liquidations over the past 24 hours, the vast majority of which (around $124 million, or 72%) came from liquidations of open short positions.
As the price of major cryptocurrencies has rallied in recent weeks -- spurred by a combination of factors, including strong inflows into Bitcoin ETFs, an upcoming Bitcoin halving event, and expectations for the possible approval for the first spot Ethereum exchange-traded funds (ETFs) -- it appears that short-sellers are effectively being forced to close their bearish positions. The resulting surge in buying demand can cause a so-called short squeeze, sending digital asset prices even higher in the process.
Meanwhile, technical trading patterns may also be playing a role. According to the widely followed Bitcoin analyst TechDev on social media platform X, the price of Bitcoin appears to be consolidating above key technical levels and trading averages that have historically preceded significant rallies for the world's most prominent cryptocurrency.
Is China entering the Bitcoin ETF market?
If that wasn't enough, Chinese financial news site Securities Times reported on Monday that multiple China-based financial giants, including Harvest Fund and Southern Fund, have submitted applications through Hong Kong subsidiaries for their own spot Bitcoin ETFs. Those applications are currently awaiting regulatory approval.
This news is particularly significant, given China's previous public hostility against Bitcoin. In 2021, China's top regulators even banned crypto trading and mining, sending the price of Bitcoin plunging at the time. It became evident in recent years, however, that China's ban on crypto wasn't absolute, and crypto trading and mining has reportedly continued to thrive in the country. If China is indeed softening its stance, it would serve as only the latest significant validation for the global adoption of Bitcoin and other cryptocurrencies.
The U.S. Securities and Exchange Commission (SEC) only approved the world's first 13 Bitcoin ETFs in January 2024. The historic approvals served as arguably the most prominent validation yet of cryptocurrencies as a legitimate investment asset class. Because ETFs can be bought and sold throughout the normal trading day via nearly any online brokerage -- in contrast to requiring investors to set up separate crypto trading accounts with a crypto-specific firm -- they're a much more accessible investment medium for anyone considering making cryptocurrencies a meaningful part of their portfolio.
Bitcoin ETFs have experienced enormous inflows since then; late last month, for instance, the ARK 21 Shares Bitcoin ETF (NYSEMKT: ARKB) registered net inflows of more than $200 million, becoming the third Bitcoin ETF in the U.S. to cross the $200 million mark this year.
For perspective, China's Harvest Fund and Southern Fund manage over $230 billion and $280 billion in total assets, respectively. So, if their Bitcoin ETF applications pass regulatory muster through their Hong Kong subsidiaries, and the mainland Chinese government continues to opt for a more cautious approach with indirect approval, it could signal a massive positive shift toward more pervasive crypto adoption over the long term from the world's second-largest economy.
That certainly doesn't guarantee that Bitcoin, Ethereum, and Dogecoin will continue this incredible rally indefinitely. But as cryptocurrencies, in general, continue to enjoy greater adoption on a global scale, it's hardly surprising to see the prices of the most prominent digital assets continuing to reach new highs.
