Ethereum blasted previous $3.6K for the primary time since January.
And because the Kobeissi Letter identified, it’s proper in the midst of one of many largest brief squeezes crypto has ever seen.
Right here’s what occurred:
Initially of July, tons of merchants had been shorting ETH.
(Fast explainer: shorting = betting the value will drop. You borrow ETH, promote it now, and hope to purchase it again cheaper later so you’ll be able to hold the distinction. But when the value goes up as a substitute, you lose cash.)
However on the identical time, huge dawgs like Ethereum treasury corporations and ETFs had been steadily shopping for ETH.
Matter of truth, ETFs simply had their greatest two days ever – $1.32B in inflows.
Now, right here’s the issue for the shorts: as a result of demand was steadily constructing, ETH began growing. And since they had been betting in opposition to it, they began dropping cash.
On prime of that, lots of these shorts had been utilizing leverage (principally borrowing much more cash to make their bets larger), so their losses added up even quicker.
Ultimately, the losses received so huge that exchanges routinely closed their positions – one thing referred to as liquidation.
To shut out, these merchants had to purchase ETH to pay again what they borrowed.
However right here’s the factor: when a bunch of brief sellers are pressured to purchase on the identical time, it pushes the value even greater.
And that greater value forces much more shorts to shut, which will increase the value extra.
That’s the vicious cycle referred to as a brief squeeze- and we’re seeing it play out in full pressure proper now.
This cycle has already pumped ETH 40%+ this month and added over $130B to its market cap.
Billions in shorts have already been liquidated, and if ETH climbs one other ~10%, one other billion {dollars} briefly positions might be worn out.
If this retains up, $4K ETH isn’t far off, Kobeissi says.
And ETH isn’t the one altcoin having a second.
XRP set a brand new all-time excessive above $3.60 immediately, and its market cap topped $200B for the primary time ever.
All this altcoin motion pushed your entire crypto market previous the $4T stage – one other all-time report.
However why are the vibes soo good?
To be continued…
