The price of a coin has gone up bitcoins Cryptocurrencies jumped to a two-week high on Wednesday as investors continue to weigh the fallout from cryptocurrency exchange FTX’s collapse.
But one analyst warned that the rebound could only be a correction higher in the bear market and won’t last.
Bitcoin price topped $17,000 in early trading today, its highest level since Nov. 15, before paring out gains. The cryptocurrency is up 2.4% in the past 24 hours, as it currently trades at $16,879.50.
Other altcoins also rose, including Ethereum, which rose 5% to $1,271.72.
Vijay Aiyar, vice president of business development and international affairs at cryptocurrency exchange Luno, said the upward move was likely the result of “increased hedging of open short positions with leverage.”
The process of short selling is referred to as someone who borrows a specific asset and sells it at the same time, then buys it back at a cheaper price and benefits from the difference in selling versus buying, but this time the selling is earlier to the purchase, and the purchase is motivated by two reasons: either to close his position The borrower is owed the asset and is making a profit, or because the asset is rising and losses are accelerating, and therefore seeks to stop the hemorrhaging of those losses quickly.
And when the buying is heavy due to the stop losses of a large number of people, this causes demand to intensify and the price to rise sharply.
Aiyar said that BTC price has “reached the resistance level” at $17,000 and is likely to decline from there. “This is just a downward test,” she added.
Investor confidence in cryptocurrencies has taken a major hit after Sam Bankman Fried’s FTX exchange crashed and filed for bankruptcy this month, sending shockwaves across the industry.
A bankruptcy contagion then swept through the industry, as cryptocurrency lender BlockFi filed for bankruptcy due to exposure to FTX.
More than $1.3 trillion in value has been wiped out of the cryptocurrency market this year, due to the failure of algorithmic stablecoin terraUSD in May and the collapse of hedge fund Three Arrows Capital. The collapse of FTX exacerbated the situation.
