According to the Crypto Fear & Greed Index, crypto market sentiment in the third week of December remains dominated by fear, with scores of extreme fear. This negative sentiment has led to short positions becoming predominant.
However, some altcoins have their own catalysts that can cause the liquidation of these short positions. Which altcoins are they and what specific risks do they face?
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1. Solana (SOL)
SOL’s 7-day liquidation heatmap shows that the potential liquidation volume for short positions is twice that of long positions.
Specifically, if SOL rises to $147 this week, traders holding short positions could incur losses of up to $1 billion. In contrast, if SOL falls below $120, long traders could face approximately $500 million worth of liquidations.
Several factors suggest that traders should be cautious when holding short positions this week.
First, the SOL ETF recorded positive inflows for seven consecutive days last week. Notably, the Bitwise SOL ETF has maintained positive inflows for 33 consecutive days since its launch. It currently holds more than $600 million worth of SOL. This trend indicates continued institutional demand.
Second, SOL has established strong support around the $130 level over the past four weeks. Additionally, positive news of XRP expanding DeFi use cases on Solana through Hex Trust improved market sentiment.
As a result, SOL has solid grounds for recovery this week, potentially triggering a short liquidation.
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2. Cardano (ADA)
Similar to SOL, the overall negative sentiment in the market prompted short-term ADA derivatives traders to increase their capital allocation and increase the leverage of their short positions.
This behavior significantly increased the total amount of short liquidations. If ADA rises to $0.45 this week, short positions could incur losses of up to $50 million. Conversely, if ADA falls to $0.35, long positions could face liquidation of approximately $19.5 million.
One of the key factors for ADA short traders to consider to reduce risk is the positive sentiment surrounding the Midnight project.
Midnight Network is a new blockchain developed by Input Output Global (IOG), the company behind Cardano founded by Charles Hoskinson.
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Midnight Network focuses on privacy through zero-knowledge proof technology, specifically ZK-SNARK. NIGHT token has surged over 150% in the past 7 days. The project also won BeInCrypto’s “Breakthrough of the Year” award.
With the increasing demand for NIGHT, the demand for ADA is also increasing. According to the Taptool trading platform, NIGHT recorded a DEX trading volume of over 85 million ADA in the past five days. Additionally, ADA holders can earn NIGHT by staking their ADA.
3. Pippin
PIPPIN is a meme coin that gained a lot of attention towards the end of the year. The company’s market capitalization soared from less than $60 million to more than $350 million in just three weeks.
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The liquidation heatmap shows that the accumulation of potential long-term liquidations is still higher than short-term liquidations. This data suggests that many short-term traders still expect prices to continue rising.
However, this expectation comes with significant risks. A recent analysis by on-chain data tracking account Evening Trader Group revealed that 93 wallets currently account for 73% of the total supply.
These wallets are divided into three main accumulation clusters. Each cluster exhibits different origins and behavioral patterns. According to Evening Trader Group, this accumulation could be the main reason for the price hike. On the other hand, selling pressure can appear at any time.
Additionally, an account linked to the project (ThePippinCo) has not posted any updates since June. This silence raised concerns about the team’s commitment to the project.
If PIPPIN falls below $0.30 this week, over $9 million of long positions could be liquidated. This number could be even higher if PIPPIN experiences a sharp dump, similar to the fate of other manipulated meme tokens.
