Bitcoin (BTC +1.04%) saw some strong buying pressure materialize over the weekend, with the price of a Bitcoin token rising 3% from 4 p.m. ET on Friday to 2 p.m. Monday. This move came amid a stark sentiment shift in the market, with other risk assets in the equity market seeing similar moves (the NASDAQ is up more than 2% over this same time frame).
CRYPTO: BTC
Key Data Points
Much of this weekend move appears to be tied to expectations that the longest government shutdown ever will soon come to a close, with House representatives set to vote on a bill that would reopen the government.
That said, there are other factors at play driving Bitcoin higher in recent days. Here's what investors should be focusing on right now.
Short covering and liquidation potential driving big capital inflows
Source: Getty Images.
Among the more compelling catalysts for Bitcoin holders that I've read about over the last few days is news that large-scale short positions against Bitcoin either directly or indirectly are being unwound.
Reports surfaced earlier this morning that famed short-seller Jim Chanos has exited his short position in Bitcoin treasury company Strategy (MSTR 5.08%), arguing that the valuation gap between the company (and its Bitcoin holdings) and Bitcoin itself has narrowed to a level that does not justify such a bearish investing thesis.
Other investors in the cryptocurrency sector may be more intrigued by perpetual futures (derivatives) trading activity tied to Bitcoin. A large number of bullish bets have been placed suggesting Bitcoin could breach the $112,000 range. And with Bitcoin now hovering around $106,000 (another level with a large clump of orders), any sort of liquidation surge for bearish investors betting against Bitcoin could drive this token toward that level.
Liquidations activity today shows that roughly $76 million of the $106 million in liquidations Bitcoin has seen over the past 24 hours has been on the short end, spurring buying activity as these bearish bets are wiped out. If we see additional indications that this trend is accelerating, I'd expect traders and speculators to drive the next momentum-driven rally that retail and institutional investors will jump on.
