Bitcoin was having a pretty dull summer. Until yesterday. A sudden rally sent the digital currency nearly $700 higher in one hour Tuesday afternoon, ending weeks of relative tranquility in prices. It reminded investors that cryptocurrencies remain a Wild West marketplace, where it’s often difficult to know what’s driving price moves. Bitcoin spiked to as high as $7,440.25 at 2:22 p.m. Eastern time on Tuesday, up 11.7% from where it was trading late Monday afternoon, according to research site CoinDesk. The move came after bitcoin had spent 15 consecutive days hovering between $6,000 and $7,000. No clear news development drove the abrupt price surge. Some traders pointed to a large “short squeeze” on BitMEX, a popular cryptocurrency derivatives exchange. In a short squeeze, a number of traders who have bet that a particular market will drop--so-called “shorts”--exit those bets to limit losses. That can result in a sudden rally. Some social-media accounts marveled at the heavy trading on BitMEX. “Seriously… carnage @ bitmex today,” a Twitter user named CryptOrca wrote. A spokesman for the exchange did not immediately respond to a request for comment. BitMEX, which is legally incorporated in the Seychelles, was recently in the news after it parked three Lamborghinis outside a virtual-currency conference in New York. It’s been a while since bitcoin had a drastic price move. In December, when bitcoin reached its all-time high of nearly $20,000, the average daily price move in the digital currency was 14.6%, according to an analysis of CoinDesk data by the WSJ Market Data Group. But since then such big price swings have become more unusual: So far in July, daily moves have averaged 4.1%, even including Tuesday’s big jump. It remains to be seen whether the swift rally will draw retail investors back into bitcoin--or scare them off. Inflows from small investors were pivotal to bitcoin’s huge price run-up last year. But in recent months, bitcoin has been out of the headlines, and many investors have shifted their attention elsewhere. Worldwide Google searches for “bitcoin” peaked the week starting Dec. 17, which is also when the digital currency hit its record high. Last week, Google searches for “bitcoin” were 9% of that record level. “If the news media isn’t covering it and there isn’t price direction, people mostly stay on the sidelines,” said Kevin Beardsley, a London-based managing director at cryptocurrency-trading firm B2C2. Where do you think bitcoin prices are headed? Tell the author your thoughts at alexo@wsj.com. |