Why is crypto going up today? 3 reasons and 1 big warning sign

Why is crypto going up? It may be the most critical question for investors right now.

Technically speaking, the total crypto cap is up by over 5%, approaching the $3 trillion mark and reclaiming this zone for the first time since losing it in the mid-January cycle.

Back then, the total market cap reached $3.3 trillion, while Bitcoin [$BTC] peaked at around $93k. The market is once again approaching this significant resistance area, with only a few more inflows to go for a breakout.

The critical question now is what is driving this move. As the chart below shows, traders liquidated more than $900 million in short positions on the 21st of September alone, marking the strongest single-day short squeeze in over a month.

The previous major squeeze hit on the 21st of August, when traders closed more than $1.25 billion in short positions. What followed was nearly four weeks of consolidation, with $BTC remaining below $80k.

Short covering may drive prices higher rapidly, but demand for the asset may not last long.

As crypto nears the $3 trillion area of resistance again, the important question is whether new Spot inflows are strong enough for the move to gather momentum or whether another short squeeze is driving the market higher.