TL; DR
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In a short squeeze, people borrow a stock or cryptocurrency that they think is about to drop in price and immediately sell it. Once the 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 an old-fashioned short squeeze.
Full story
Tell us if you’ve heard these (we’ve told you before):
A few years ago, Toyota announced to its registered service partners that all 2008 Corollas had an airbag failure.
They told their service partners that this was the case should not would be under warranty, and that they would announce this publicly in a week.
One particularly cunning mechanic thought this would devalue the car – and devised a plan to take advantage of it.
He called three of his customers, who he knew were driving the ’08 Corolla in question, and told them it was time for an immediate and comprehensive service (new clutch, new timing belt, that sort of thing).
The trusting customers were told that the service would take about a week.
During that time, the technician:
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I took the three cars to a used car dealer.
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Sold them all for $5,000 each ($15,000 total).
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Waited for the bad news to come out.
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Went back to the dealer.
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I bought them back at a discount: $4K each ($12K total).
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Pocketed the $3,000 difference as profit.
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He returned the cars to his non-accepting customers.
We made that story up, but for a good reason.
You just learned about short selling from Miyagi…
That’s where people borrow a stock or cryptocurrency that they think is about to drop in price, and immediately sell it. Once the price drops, they buy it all back, pocket the difference, and return the coins to the original owner.
Or, like the price not licorice…they have to buy it all back more than what they sold it for – which can push prices even higher, in what is commonly called a “short squeeze.”
Why are we telling you all this?
Because that’s how Bitcoin somehow shot from ~$30,000 to $35,000, between Monday afternoon and Tuesday morning – it was an old-fashioned short squeeze.
Short sellers were forced to buy ~$145 million worth of Bitcoin to pay back their debts, all in a very short time.
Okay, now you know!