The price of bitcoin surged more than 2% on Thursday, 8th September, nearing $630 as speculators caused the digital currency to extend gains produced earlier this week.
The digital currency’s climb did not coincide with any major news catalysts, and while trading volume picked up to the last few sessions, it was still generally low.
Considering these tepid market dynamics, a short squeeze likely fueled bitcoin’s more than 2% gain, Petar Zivkovski, director of operations at leveraged bitcoin trading platform Whaleclub, told CoinDesk. At press time, the digital currency had reached a high of $628.75 at 12:30 UTC, according to the CoinDesk USD Bitcoin Price Index.
This climb took place after a six-day period when long exposure, as measured by total position size, averaged 87%, Whaleclub data reveals. The increase built upon gains created earlier in the week, including bitcoin’s rise above $600 on Sunday, 4th September, the third consecutive session where long exposure exceeded 80%.
The $600 figure represented a key psychological barrier, as the digital currency had been trading below this level for more than a month after a Bitfinex security breach on 2nd August resulted in the exchange losing 120,000 BTC.
At the time, markets responded to this event by sending the digital currency nearly 20% lower.
Zivkovski is not the only market observer who has pointed to the key role that speculators play in bitcoin trading.
Cryptocurrency investment fund manager Jacob Eliosoff, for example, said that the digital currency’s market has a ratio of speculators to users that is “large” and “unhealthy”.
“Most traders just buy in hopes of selling at a profit,” he told CoinDesk. “If bitcoin ever succeeds in growing its user base, I expect we’ll see fewer of these gap-py jumps and drops.”
Should the digital currency enjoy the rising adoption that Eliosoff hopes for, bitcoin could easily enjoy further price gains.
While this scenario may take some time to play out, bitcoin’s continued gains above and beyond $600 could portend further appreciation in the short-term, said Zivkovski.
“The price rise from $600 has held quite steadily, without pullbacks, and has made newer highs since,” he told CoinDesk. “This is a bullish sign and may indicate the beginning of a new flow of money coming in to place buy orders.”
Zivkovski emphasized that current market dynamics could easily fuel further gains in the near future.
However, Zivkovski also noted that bitcoin prices currently face significant resistance. To surpass $640, the digital currency will need “a good amount of firepower,” he said.
Alternatively, bitcoin prices might fall back, potentially dropping down to the low $600s, he noted.
Dice image via Shutterstock
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