Markets See Massive Short Squeeze

BTC Jumps $400 In 10 Minutes

The market traded mostly sideways today as the market had no real sense of urgency.

That quickly changed as we saw BTC jump in price almost $400 over the span of around 15 minutes.

So what happened?

As the market is already on shaky ground due to the recent price instability and fears regarding regulation creeping back in, it makes sense that we would see a massive spike in BTCUSD shorts as people try to get on the right side of the market direction.

The spike in shorts lasted around an hour in duration. Likely some bots jumped on the trend and it quickly snowballed as more short positions were opened. For a time we had clearly exceeded the previous ATH for BTCUSD shorts.

Then the trend changed rapidly.

It’s possible the whole thing was orchestrated by a few market manipulating whales, but it’s just as easy to blame the current state of the market and its indecisiveness.

Whatever the catalyst, what came up quickly came down as over half the new positions were liquidated within 30 minutes, spiking BTC from $6123 to $6517 in a matter of minutes.

Given Bitcoin’s market dominance, this move quickly propagated throughout the market.

While it’s easy to pass this off as a purely technical move in an otherwise stale market, I think there are deeper implications here.

We are 11 days from the SEC’s decision deadline for the VanEck-SolidX Bitcoin ETF.

As the agency wrote:

“Accordingly, the Commission … designates September 30, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change.”

The SEC will also possibly delay the decision further. By law, that would be the final time they can. That delay will likely be until some time between February 21st and February 27th, 2019. The thing to note, however, is that this is not inevitable. It is possible, although unlikely, that the SEC will give their decision on the VanEck Bitcoin ETF now instead of waiting until 2019.

I think these next few days will be a source of trepidation for the market.

Should the decision be delayed until 2019, it will be a more favorable position for approval. New SEC commissioners who are friendlier to crypto will be at the helm by then, and it will also give the market time to mature and counter the SEC’s previous reasons for denial of ETF applications.

On the flipside, days like today where the market moves in part due to regulation fears are ironically hurting chances of regulators giving it favor.

As it stands, there simply isn’t enough liquidity to prevent a small number of people moving the price significantly. The paradox, of course, is that institutional money would help abate this, but we’d be trading one set of market manipulators for another. Additionally, if we need institutional money to help alleviate liquidity issues, institutional money won’t touch crypto until regulations are favorable, and regulations are slow moving due to liquidity issues.

In short, it’s an emerging market. Nothing is perfect, but the promise of a new industry and asset class makes the pain worth it.

The next week will be critical. If we see a delay of the ETF decision, then I think approval is much more likely. If we see a denial, it will be the end of the last true ETF application currently under review. Of course, new applications can come, but as it stands we aren’t likely to see ETFs for some time.

A rational voice and staunch crypto supporter, SEC commissioner Hester Peirce has stated that the government should not limit the emergence of new products in the crypto market based on the perceived weaknesses of Bitcoin.

According to Peirce, the SEC should not force crypto markets to be subjected to comprehensive government regulation just to deploy products on top of the markets. She explained:

“The Commission should not default to a demand that the crypto markets be subject to comprehensive government regulation as a precondition to allowing products linked to those markets to be traded in markets that we regulate.”

Whatever happens, hang in there.

Doc has started to do a frequent live “Trade School” video; watch for announcements and links in the “Premium Chat” room of our Discord site. 

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See you tomorrow!

Our next scheduled Premium-Only Livestream is scheduled for 19 September 2018 at 8 PM EDT (UTC/GMT -4 hours). Watch below for new link. Doc has also been doing a daily “Trade School” video with links in the Premium Chat room of the Discord page.

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Defensive Actions for the next trading day: 

• None.