Dash Price Rise, Explained

4.

The surge is likely to have been caused by a combination of factors, such as development news about Dash and speculative activity.

For one, there has been major news impacting the user value of Dash: the coin has partnered with a digital payments service BlockPay, in order to enable point-of-sales payments of Dash. This can potentially result in a significant boost to Dash’s usability, as direct payments in brick and mortar shops are a rare option for any cryptocurrency, even Bitcoin. However, that news alone could not make Dash the third most popular coin.

One more possible reason for the sudden spike is thought to be speculative activity. Poloniex, an online cryptocurrency exchange, is a place with the largest amount of Dash trading volume, by far. Poloniex also offers margin trading option. It means that a person allows a trader to use their assets to make deals in exchange for a percentage commission.

This environment has resulted in large amounts of ‘shorting,’ which is a controversial practice of selling borrowed assets, in this case, Dash with an expectation of a decrease in value. After the supposed price drop, the traders then buy the assets back at a lower value, return it to the lender and pocket the difference.

However, if in reality the price instead increases, it may result in a situation known as ‘short squeeze.’ When a shorting trader sees a slight increase in price, they may decide to buy back at a loss, in order to prevent the possibility of even larger losses, in case the price keeps growing. That creates a positive feedback loop, whereby a growing price provokes shorters into selling, and them selling drives the price even further up. This is seemingly what happened with Dash.

So, ultimately, the price spike has been caused by the combination of positive news about the cryptocurrency and the speculators’ reaction to that news.

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