The price of Bitcoin has risen by nearly 10% in the past week, driven by two factors:

In the past week, the price of Bitcoin has risen by nearly 10%. The bullish market sentiment and low liquidity have created an environment for obtaining ideal returns due to price increases.

The digital currency has seen significant gains this week, breaking through $600 on Sunday, September 4, and has largely avoided a price correction.

Petar Zivkovkski, operations director at Whaleclub, said market sentiment is so strong that “players are not willing to bet against the rise of BTC/USD.”

Petar Zivkovkski told CoinDesk:

New short positions are opening at almost all-time lows, suggesting that the market expects continued gains. Tim Enneking, chairman of cryptocurrency investment manager EAM, also sees the forces currently driving the market.

He said: "Market sentiment is generally bullish."

Fast start, generally bullish

Bitcoin prices have had a fast start to the week, opening at $571.68 on September 2 and reaching $599.60 by the second trading day, a gain of 4.9%, according to the CoinDesk USD/Bitcoin Price Index (BPI).

Although the digital currency failed to break through the resistance level when testing $600, according to BPI data, on Sunday, September 4, it broke through the key psychological price level, rising to an intraday high of $612.39.

The price of the digital currency rose by more than 6% over the weekend (September 3 and 4). Whaleclub data revealed that market sentiment was strongly bullish during these two days.

According to Whaleclub data, the confidence index reached 86% on September 3 and 87% on September 4, which is significantly higher than the average level.

According to data provided by BFXData, during this period, the US dollar margin funds used to measure the value of long-term bets have clearly surpassed the BTC and LTC margin funds used to measure the value of short-term bets.

Basis Risk

Zivkovkski told CoinDesk that Bitcoin is enjoying the surge and bullish sentiment after the digital currency corrected for several weeks following “the hack of exchange Bitfinex.”

During this period, due to the Bitfinex hack, many market participants suspended trading, which directly affected the trading volume. According to Bitcoinity data, as of September 8, the total Bitcoin transaction volume for 7 consecutive days was 7.82m (7,800,000).

During this period of volatility, Zivkovkski said: "It lasted for several weeks, during which the market was also starting, and traders were gradually opening positions through margin, and betting on price increases and decreases was basically flat." Zivkovkski said that this large amount of speculative chips combined with low trading volume will make the market extremely vulnerable to short-term and long-term squeezes. A single transaction of less than 600 BTC executed by one or more market participants will also trigger a short squeeze.

Jacob Eliosoff (cryptocurrency investment fund manager) emphasized that this sharp rise, which occurred over the weekend, required significant buying and short squeezes to force speculators to close their short positions.

“This week’s rally clearly indicates a gradual recovery,” he told CoinDesk. “A short squeeze can turn a small rise into a jump, but it can’t turn a flat line into a jump.”

BPI data showed that the digital currency price had been trading between $600 and $615 from September 5 to 7, following the weekend’s surge.

During this three-day period, the market's long-term average was at 86.3%, and confidence was also high, averaging 84.3% over these three days.

Bitcoin Outbreak

BPI data shows that on Thursday, September 8, the price of digital currency exploded, rising by more than 2%, reaching a weekly high of $628.75.

Zivkovski said this was another short squeeze, with such price action occurring on low volume and without any clear news catalyst.

In the short term, the market could see further short squeezes as “the market is pretty illiquid right now,” Zivkovski told CoinDesk on Sept. 9. “Shorts are being cleared out right now as prices continue to rise. Shorts are preparing to reopen longs or simply wait a while before entering the market,” he said, adding that they could change the direction of the market on a whim.