Bitcoin price continues to course a path upwards for the second day, briefly moving past $26,000 before reversing its trajectory. As of this writing, it is changing hands for $25,989.38, up roughly 7.5% from yesterday.

Analysts and news reports have pointed out that the jump in its price coincides with the release of favorable inflation data, signaling a correlation with macroeconomic factors.

Not Much to Cheer About

Bitcoin’s perceived correlation with macro developments is a cheering thought for crypto enthusiasts because it takes attention away from the turmoil afflicting crypto from regulators.

Over the weekend, USDC, the world’s second biggest stablecoin, lost its peg after it was revealed that it had funds stuck at Silicon Valley Bank (SVB). SVB failed after a run on its deposits by the tech community. The depegging event was the latest catastrophe to hit crypto during a month of regulatory blitzes.

But the macro narrative runs on thin ground. There are no fundamental factors propelling bitcoin upwards. Instead, investors are liquidating long and short positions in bitcoin at a rapid clip. Thus, Bitcoin’s price jump is likely a short squeeze caused by a flurry of activity caused by trader exits.

Choppy Waters Ahead

The cryptocurrency’s hash rate, a measure of the computing power deployed to mine it, had been climbing until this past weekend but has reversed course since Saturday. Its network difficulty, which is used to signify complexity of the algorithm used to mine bitcoin, has remained constant.

Previously both indicators moved in tandem to maintain a uniform supply of bitcoins to the market. The change in supply means fewer bitcoins are circulating in the market even as demand subsides.

Whales, or those who hold more than 1,000 bitcoins in their wallets, are busy moving their holdings to Binance, the exchange that has the highest trading volumes for bitcoin. Previous research has identified the exchange as an emitter of crypto volatility and the entity responsible for setting bitcoin price.  

USDC Depegging Winners

Typically, the loss of peg for a stablecoin is a profit opportunity for traders because they can turn around and exchange it for $1. But USDC’s depegging event last weekend produced few winners. Circle and Coinbase, the only two venues to exchange USDC for dollars, paused redemptions over the weekend, cutting off traders from gains.

But it was business as usual in the decentralized finance (DeFi) ecosystem.

Liquidity pools, which function with smart contracts and automated market makers (AMMs) that set prices, were especially successful venues to exploit the peg. Curve Finance, one such liquidity pool, reported trading volumes of $6.03 billion, the highest in its short history, for Saturday.

That figure was mainly a result of increased trading volumes for wrapped ether, whose price increased, and Tether’s USDT, which also lost its peg, against USDC. Uniswap, another liquidity pool, also reported high trading figures.

Who Won?

Theoretically, liquidity providers to a pool make money through trading fees on decentralized exchanges (DEX). The amount of profits depends on the liquidity provided and trading volumes. The biggest holders of USDC coins reads like a list from the rogue’s gallery: MakerDAO (whose DAI stablecoin holds USDC reserves and lost its peg), crypto exchange Binance, and bankrupt lending firm Voyager.

Another winner from USDC’s depegging was Tether. The crypto world’s biggest stablecoin by market capitalization has been on a tear lately. This is not because it has finally come clean about its affairs but because its competitors are becoming fewer. It has added $5 billion to its market cap in the last month without much effort. As of this writing, it has a market cap of $73.1 billion.