Bitcoin Hash Rate Recovers to 110 TH/s as Price Rallies Past $40k, Thanks to Largest Short Squeeze Ever

While having bounced back into a neutral state, a break of $42,000 would take Bitcoin price to the $50k level.

The price of Bitcoin and Ether are holding strong.

After going to $40,555 on Coinbase on Monday, Bitcoin slid down under $36,500 but is back above $38k today. The same is the case with Ether, which rallied to just above $2,435 only to drop to $2,150 but is now back around $2,300. ETH 0.94% Ethereum / USD ETHUSD $ 3,428.40
Volume 15.97 b Change $32.23 Open $3,428.40 Circulating 117.58 m Market Cap 403.11 b
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Much like the top two cryptocurrencies, the rest of the market is enjoying gains, with the total market cap above $1.55 trillion after bottoming at $1.25 trillion on July 21st. Still, we have a way to reach a $2.55 trillion peak from mid-May.

The latest strength in the market, as we reported, has been the result of a short squeeze of just over $964 million, as per Bybt. This was the largest short squeeze ever recorded in bitcoin history, surpassing the squeeze amid bitcoin breaking its 2017 ATH on December 16th-17th.

Stablecoin denominated open interest has become far more common in bitcoin in the last few months. According to Arcane Research, “shorting with stablecoin denominated collateral is suboptimal,” which is why we had this very dramatic short squeeze.

On some exchanges like Binance, we saw this move leading BTC price to rocket past $48k, while on other exchanges, BTC didn’t even touch $40k.

“Market was nervously bid as we approached the 35-36k short gamma region. Dips were brief and shallow, coupled with the non-stop call buying requests popping up late into Asia night on Sunday,” noted QCP Capital.

Despite this sharp move higher, “the market does not feel particularly stressed,” with volatility rallying only modestly, it said. Also, “risk reversals remain skewed to the downside even as we close in on the 40k pivot level in BTCUSD,” added QCP Capital.

This move higher, according to QCP Capital, is a bounce-back into a neutral state after being overstretched to the downside below $30k. But a break of $42k is expected to take us to the $50k level in Aug-Sep if BTC price follows the 2018-20 analog, “before a bigger top eventuates,” it said.

For now, just like the prices, fundamentals are recovering, especially the hash rate. After the exodus of Chinese crypto miners, the hash rate had a severe drop, more than 50% falling to about 68 Th/s.

But now, as miners come online again, the hash rate is aiming for 110 Th/s.

Bitcoin’s natural adaptation to changes in the hash rate came after Bitcoin’s mining difficulty had its largest-ever negative adjustment of 28%. This marked the 4th straight decline in difficulty, the longest such streak since 2011 when difficulty decreased 8 times in a row.

“This is simply a sign that Bitcoin is naturally readjusting to relatively large changes in hash rate, as designed,” stated CoinMetrics.

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