Major cryptocurrencies bounced early Friday as traditional market investors shrugged off Federal Reserve Chairman Jerome Powell’s pro-liquidity tightening stance.
The rally appeared to be touched off by speculation that risky assets, such as stocks and cryptocurrencies, could draw strength from a pivot next year by central banks toward monetary easing as economic conditions worsen and inflation subsides.
MSCI’s broadest index of Asia-Pacific shares except Japan jumped 0.3%. The futures tied to the S&P 500 rose 0.3%, hinting at an extension of a two-day rally, while the European stock futures signaled a positive open. The dollar index dropped 0.7% to 108.80, signaling continued weakness in the greenback.
Bitcoin short squeeze
The rapid price movement led to major trading-position liquidations on crypto exchanges due to margin calls.
In recent weeks many traders had used futures and other contracts to bet that the bitcoin price would drop further – known as “shorting” BTC. The sentiment was so negative that analysts argued the setup might be attractive for a short squeeze, CoinDesk reported last week.
So in the past 24 hours, some $101 million of short positions were liquidated as a result of the sudden upswing in price, the most since the June 14 crash, according to data by Coinglass.