TL;DR
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A short squeeze is where folks borrow a stock or cryptocurrency they think is about to go down in price and sell it immediately. Then once price drops, they buy it all back, pocket the difference and return the coins to the original owner.
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That’s how Bitcoin somehow shot from ~$30k-$35k, between Monday afternoon and Tuesday morning – it was a good old fashioned short squeeze.
Full Story
Tell us if you’ve heard this one (we’ve told it before):
A few years ago, Toyota announced to its registered service partners that all 2008 Corolla’s had an airbag fault.
They told their service partners that it would not be covered by warranty, and that they were going to announce this publicly in a weeks time.
One particularly cunning mechanic figured this would devalue the car – and hatched a plan to profit from it.
He called three of his customers, who he knew drove the ’08 Corolla in question, and told them it was time for an immediate and wide ranging service (new clutch, new timing belt – that sort of thing).
The trusting customers were told the service would take a week or so to complete.
In that time, the mechanic:
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Took the three cars to a used car dealership.
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Sold them all at $5K a piece ($15K total).
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Waited for the bad news to come out.
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Went back to the dealership.
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Bought them back at a discount: $4K each ($12K total).
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Pocketed the $3K difference as profit.
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Returned the cars to his un-assuming customers.
We made that story up, but for good reason.
You’ve just been Miyagi’d into learning about ‘short selling’…
Which is where folks borrow a stock or cryptocurrency they think is about to go down in price and sell it immediately. Then once price drops, they buy it all back, pocket the difference and return the coins to the original owner.
Or, if the price doesn’t drop…they have to buy it all back for more than what they sold it for – which can push prices even higher, in what’s commonly referred to as a ‘short squeeze.’
Why’re we telling you all of this?
Because that’s how Bitcoin somehow shot from ~$30k-$35k, between Monday afternoon and Tuesday morning – it was a good old fashioned short squeeze.
Short sellers were forced to buy up ~$145M worth of Bitcoin to repay their debts, all in a very short amount of time.
Alright, now you know!
