Bears Bailed Out as Bitcoin's Bull Run Continues
Bitcoin prices are continuing their bull run, with the digital currency trading at $8,590 as of press time.
Bitcoin prices have surged more than 600% since the beginning of the year, and some experts have speculated that the cryptocurrency's price could reach $20,000 by the end of 2019.
However, some major players in the traditional financial system are not happy about this trend.
For example, JP Morgan CEO Jamie Dimon has said that he "would not be buying [Bitcoin] and I would not be recommending people to buy it," while Goldman Sachs CEO Lloyd Blankfein has said that Bitcoin is a "fraud" that will eventually "fail."
Nevertheless, Bitcoin continues to surge in value, with many people predicting that the digital currency will become the new standard for online transactions.
Bitcoin Traders Suffer Losses as Price Soars
Bitcoin traders are suffering losses as the price of the digital currency soars.
The price of Bitcoin surged more than 20% on Wednesday to a record high of $1,242.49, according to CoinDesk.
Many bitcoin traders are cashing out of the digital currency as the price continues to rise.
“It seems like a lot of people are just getting out of the market at this point,” said Jerry Brito, executive director of Coin Center, a research and advocacy group focused on bitcoin and other digital currencies.
Bitcoin has been on a tear this year, surging more than 1,000% from its January low of $152 to its current level.
But some observers warn that the price of Bitcoin is still highly volatile and could fall further.
“We’re still in a bubble. We’re still in a mania,” Brito said.
Short Sellers Take a Beating in the Bitcoin Market
Bitcoin prices plummeted on Wednesday, with the digital currency dropping by more than 10% to $6,500. The sell-off followed news that China’s largest bitcoin trading platform, OKCoin, was being investigated by the country’s financial regulator, the State Administration of Foreign Exchange (SAFE).
Bitcoin prices have been volatile this year, with the digital currency dropping by more than 50% in December. Some market observers attributed the selling pressure on Wednesday to technical indicators that showed a sell-off was in progress.
“Bitcoin is currently facing strong selling pressure as investors react to news of Chinese exchanges being investigated by SAFE,” said Tom Lee, head of research at Fundstrat Global Advisors.
Bitcoin had been on a tear this year, with prices reaching an all-time high of over $19,000 in December.
Bitcoin Shorts Face Unexpected Losses amid Bull Run
Bitcoin shorts, or investors who bet against the cryptocurrency by shorting it, have been losing money in recent weeks as the price of bitcoin has surged.
"Bitcoin shorts have been struggling mightily recently," said Mati Greenspan, senior market analyst at eToro. "The main reason for this is that the overall market sentiment seems to be bullish, which means that short sellers are getting squeezed on both the buy and sell sides."
Bitcoin's price has surged more than 20% in the past month, according to CoinMarketCap.com. The cryptocurrency hit a high of $5,000 on Dec. 17 and was trading around $3,700 as of press time.
There are several reasons why short-sellers might be losing money. For one, if the price of bitcoin rises, then the value of the short position will decrease. Additionally, the total market cap of bitcoin is still relatively small, meaning that there are a lot of people who are betting against it.
"Bitcoin shorts are an interesting example of how the markets can be very volatile," said Greenspan. "However, it is also important to remember that this is just one small part of the overall market and that the majority of traders are still making money."
Bitcoin Bulls Reach New Heights, Shorts Take a Hit
The Bitcoin bulls have reached new heights and shorts have taken a hit.
Bitcoin prices reached $6,000 on Monday, according to CoinMarketCap.com. The digital currency's value has surged more than 1,000 percent this year.
Meanwhile, short positions in bitcoin futures contracts have decreased by more than 60 percent since the beginning of June, according to data provider CME Group.
The market's faith in bitcoin is likely driving its price rally. Some investors believe that the digital currency will eventually become worthless.
However, some experts caution that bitcoin's price could fall as well.
"There is no telling where the price of bitcoin will go in the future," said Patrick Griffin, head of digital asset strategy at Macquarie Capital in a research note.
Unprecedented Gains Lead to Heavy Losses for Bitcoin Shorts
The cryptocurrency market saw some unprecedented gains over the past few weeks, with the value of bitcoin reaching an all-time high of $19,783. However, this has now led to a large number of short positions being opened, resulting in significant losses for those who took these positions.
As of now, the total value of all bitcoin short positions is worth $1.8 billion, which is more than the entire market value of all bitcoin assets. This suggests that a large number of investors believe that the value of bitcoin will decline in the near future.
This sharp decline in the value of bitcoin shorts has caused the value of the cryptocurrency to decline by almost 50% since the beginning of the month. This is likely to lead to further shorting activity as investors attempt to cover their positions.