Bitcoin jumped about 10% in 20 minutes on Tuesday, with no obvious news spurring the price rise.

Market analysts said that new money coming into the market could have created a short squeeze, forcing traders who bet against bitcoin to buy the digital currency to cover their losses.

You can follow bitcoin's price live on Markets Insider.

LONDON — The huge spike in bitcoin's price on Tuesday may have been driven in part by a squeeze on leveraged short sellers, according to market commentators.

Bitcoin jumped more than $600, or about 10%, in a short amount of time on Tuesday. The cryptocurrency broke above $7,000 for the first time in about a month thanks to the rally. It remained above that level on Wednesday, trading up 1.13% against the dollar, at $7,397.86, at noon BST (7 a.m. ET).

Tuesday's rapid price surge didn't appear to correlate with any immediate news, and some market commentators have pinned the rise on a short squeeze.

"The assumption is this is a combination of some sort of short squeeze and some new money coming in" to the market, Mati Greenspan, an analyst with the trading platform eToro, told Business Insider in a phone interview on Wednesday.

The jump in bitcoin's price on Tuesday. Markets Insider

A short squeeze occurs when short sellers, who have bet against bitcoin's price hoping to profit from declines, are forced to buy bitcoin to cover their positions. Short bets can have nearly unlimited losses — or profits, if they go right — so investors buy the underlying asset to close out their position.

Analysts at the startup London Block Exchange said in their Wednesday morning market email: "While over the past few months we've seen several stop runs aimed at liquidating longs, it seems these fast price moves are being propelled by the cascading reactions caused by short orders closing, i.e., those who were betting against the market being forced to exit their positions."

LBX flagged a note from Cumberland, a bitcoin liquidity provider owned by Chicago's DRW, that was posted on Twitter, in which analysts said $6,850 was most likely a key stop-loss point for short sellers, or the level at which many decide to cover their losses by liquidating short positions.

"According to our calculation, roughly $180,000,000 [worth of short positions] were liquidated on BitMex during the 20+ minute period between BTC's initial spike and when it topped off," the note said.

BitMex is a Hong Kong-based cryptocurrency-derivatives platform that allows retail investors to short crypto contracts and futures. The platform offers leverage of up to 100 times. Its CEO, Arthur Hayes, told Business Insider in January that the platform had notional daily trading volumes of $1 billion.

"Liquidity is always a bit thin in this market," Greenspan said. "It doesn't have the same processes and automation as most of the traditional assets. Certainly, there would be shorts getting liquidated."

However, Greenspan said new money coming into the market might have been what pushed bitcoin above $6,850, triggering a chain reaction.

"What I'm seeing is that at the time of the spike, volumes definitely spiked at the time, but what's interesting is that US dollar volumes spiked as well," he said.

About $135 million worth of bitcoin was traded using dollars in 15 minutes during the spike, Greenspan said. That compares to five-minute volumes of $1.5 million to $2 million in the 20 minutes leading up to the spike.

Greenspan said he believes the jump in dollar volumes suggests new money was coming into the market.

He said that "generally speaking, if you're talking about seasoned crypto traders that are going in and out, that would be done in Tether," a cryptocurrency pegged to the US dollar that is used by many leading crypto exchanges to provide dollar-like liquidity.

Greenspan added that he couldn't prove that the spike in dollar volumes was due to new money coming into the market, nor could he say how many people or institutions were most likely behind the volume. He said volumes from the exchanges Bitfinex and Coinbase Pro climbed on the day.

Cumberland's note also flagged the possible role of breakout traders, technical analysts who enter the market once assets breach certain levels which they believe signal the start of rallies.

Matthew Newton, a market analyst at eToro, said in an email that "a great technical setup yesterday may also have helped spur prices forward."

Greenspan said: "Certainly it could have to do with the fact that it broke above that $6,800 level — that could very well be the catalyst. On the other hand, the breakout [above $6,800] could have happened because of new money coming in."