Bitcoin jumps 5% on short covering

Bitcoin jumped more than 5% in the span of a few minutes on Wednesday, pacing a rally in cryptocurrencies as market watchers cited potential short covering for the move.

The surge from around US$6 465 to $6 840 began at 9am Hong Kong time and took about seven minutes, according to composite pricing on Bloomberg. The cryptocurrency was trading around $6 710 at 11.03am, near a two-week high. It’s still down 53% this year.

The number of short positions in bitcoin on Bitfinex, one of the world’s largest virtual currency exchanges, has climbed near an all-time high, said Timothy Tam, CEO of CoinFi, a cryptocurrency data analysis company.

“When there’s a record number of shorts, if there’s a large explosive price movement up like this, it means people will need to cover their shorts quite quickly,” Tam said in a phone interview. “It’s almost like a domino effect.”  — Reported by Eric Lam, (c) 2018 Bloomberg LP