The price of a coin rose bitcoin On Wednesday, cryptocurrencies rose to a two-week high, as investors continue to assess the fallout from the collapse of cryptocurrency exchange FTX.
But one analyst cautioned that the bounce is likely to be just a correction higher in the bear market and will not last.
Bitcoin price in the early trading of the day surpassed $17,000, its highest level since November 15, before paring gains. The cryptocurrency increased by 2.4% in the last 24 hours, as it is currently trading at $16,879.50.
Other altcoins also rose, including Ethereum, which rose 5% to $1,271.72.
Vijay Aiyar, vice president of corporate development and international affairs at cryptocurrency exchange Luno, said the move higher was likely the result of “increased coverage of open short positions with leverage.”
The short selling process is referred to as a person borrowing a specific asset and selling it at the same time, then buying it back at a cheaper price and benefiting from the selling difference from the purchase, but this time the sale is prior to the purchase, and the purchase is motivated by two reasons: Either closing his position The borrower is due to the asset and making a profit, or because the asset is rising and the losses are accelerating, and thus he tries to stop the bleeding of those losses quickly.
And when the buying is heavy due to the stop losses of a large number of people, this causes the demand to intensify and the price to rise strongly.
Aiyar said, BTC price has “hit the resistance level” at $17,000 and is likely to decline from there. “This is just a downward test,” he added.
Investor confidence in cryptocurrencies has taken a hit after Sam Bankman Fried’s FTX stock exchange collapsed and filed for bankruptcy this month, sending shockwaves through the entire industry.
A bankruptcy contagion then spread through the industry, as cryptocurrency lender BlockFi filed for bankruptcy as a result of exposure to FTX.
More than $1.3 trillion in value has been wiped from the cryptocurrency market this year, due to the failure of the algorithmic stablecoin terraUSD in May and the collapse of hedge fund Three Arrows Capital. The collapse of FTX exacerbated the situation.