Ethereum blasted past $3.6K for the first time since January.
And as the Kobeissi Letter pointed out, it’s right in the middle of one of the biggest short squeezes crypto has ever seen.
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Here’s what happened:
At the start of July, tons of traders were shorting ETH.
(Quick explainer: shorting = betting the price will drop. You borrow ETH, sell it now, and hope to buy it back cheaper later so you can keep the difference. But if the price goes up instead, you lose money.)
But at the same time, big dawgs like Ethereum treasury companies and ETFs were steadily buying ETH.
Matter of fact, ETFs just had their best two days ever – $1.32B in inflows.
Now, here’s the problem for the shorts: because demand was steadily building, ETH started increasing. And since they were betting against it, they started losing money.
On top of that, many of those shorts were using leverage (basically borrowing even more money to make their bets bigger), so their losses added up even faster.
Eventually, the losses got so big that exchanges automatically closed their positions – something called liquidation.
To close out, these traders had to buy ETH to pay back what they borrowed.
But here’s the thing: when a bunch of short sellers are forced to buy at the same time, it pushes the price even higher.
And that higher price forces even more shorts to close, which increases the price more.
That’s the vicious cycle known as a short squeeze– and we’re seeing it play out in full force right now.
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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 another ~10%, another billion dollars in short positions could be wiped out.
If this keeps up, $4K ETH isn’t far off, Kobeissi says.
And ETH isn’t the only altcoin having a moment.
XRP set a new all-time high above $3.60 today, and its market cap topped $200B for the first time ever.
All this altcoin action pushed the entire crypto market past the $4T level – another all-time record.
But why are the vibes soo good?
To be continued…