Bitcoin Climbs Back Above $80,000 as Short Sellers Get Squeezed

Bitcoin traded at $80,498 at 6:03 p.m. ET Wednesday, up 3.5% in 24 hours per CoinGecko. That erased an election-night slide. Ether did better, rising 6.1% to $2,429.

The round trip took about 12 hours. On Coinbase, bitcoin bottomed near $75,600 in the 10 p.m. ET hour Tuesday as midterm results came in, then touched $81,130 in the 10 a.m. hour Wednesday, Unchained reported.

Shorts paid for the bounce

About $950 million of leveraged crypto positions were wiped out over 24 hours, Unchained reported, citing CoinGlass data. Shorts made up about $560 million of that, or roughly 59%. Traders who bet on an election hangover got one. It just wasn't the kind they ordered.

Here is how that works. A short seller borrows to bet that a price will fall. If the price rises far enough instead, the exchange closes the bet to cover the loan, which means buying the coin back at market. Those forced purchases push the price higher, which can trip the next batch of shorts. Traders call that chain a short squeeze.

Sentiment hasn't caught up with the chart. The Crypto Fear & Greed Index read 34 on Wednesday, still in fear territory.

The policy picture is also shifting. Democrats won control of both the House and the Senate, Reuters reported, so the committees that write crypto market rules change hands in January. Whether that speeds up or slows down a market-structure bill is an open question, and lawmakers in both parties have backed parts of past bills.

In our opinion: A 6% swing in half a day says more about leverage than about ballots. Plenty of traders leaned short into the results and were forced to buy back higher. Watch Thursday's spot ETF flows: a bounce driven by forced buying needs real buyers behind it to last.