What is a short squeeze, and why Bitcoin is over $23,000? - Episode 343 - by cryptohunt.it

What is a short squeeze, and why Bitcoin is over $23,000?

Welcome to the Cryptohunt Jam, where we spend a minute a day explaining what is happening in crypto and other game-changing ideas. As always: In plain English.

The markets have been good to Bitcoin recently. Despite multiple bad news, such as the bankruptcy filing of crypto lender Genesis, it has shot up past $23,000.

Markets bad, crypto up? Sounds illogical? A so-called "short squeeze" may be responsible.

But how does this work? Let's look at an example. Say you think the housing market is about to collapse. You decide to sell your house, rent for a few weeks, and then buy back in when prices are down.

Turns out though, you were wrong. Prices don't collapse, and instead – for a day or so – they look like they are going up. You panic, fearing to miss out, and buy back in, pushing the neighborhoods prices up with you.

That's what likely happened to Bitcoin according to market observers. Investors bet against the Bitcoin price in what is called a short sale, and when prices didn't drop, they panicked and tried to buy the Bitcoin they owed. This pushed prices up despite everyone betting against them.

And now you know what a short squeeze is. This actually happens all the time in crypto - because it is still so small in comparison, that even smaller bets against it can make the market move.

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This podcast is produced by Cryptohunt.it, the easiest place to learn all about Web3.