As the cryptocurrency market enters the first week of February, the battle between bulls and bears intensifies. While the bears still have the upper hand, the bulls seem to be seeing an opportunity. This situation makes price fluctuations more complex. Liquidation losses are increasing on both long and short positions.
Why should you keep a close eye on altcoins like Solana (SOL), Hyper Liquid (HYPE), and Tron (TRX)? We’ll explain more in the next article.
1. Solana (SOL)
In early February, SOL briefly fell below $100 amid widespread negative pressure across the market.
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The 7-day liquidation heatmap shows that potential liquidations from short positions are predominant. Leveraged short-term traders seem confident that SOL can fall further.
However, at prices around $100, SOL is located in the most important support zone in the last two years. Increasing leverage and shorting capital at key support levels often involves significant risk.
A recent BeInCrypto analysis revealed a spike in new Solana addresses in January. More than 10 million new addresses were being created every day.
Additionally, several new factors may aid recovery. These include user growth with Memecoin Launchpad, expansion of the USD1 stablecoin, SOL’s participation in the privacy trend through GhostSwap, and more.
The selling pressure caused by the overall negative sentiment is currently colliding with Solana’s own bullish catalyst near the $100 level. This collision can cause the wick to move rapidly. Both long and short traders can face liquidation losses.
CoinGlass data suggests that short interest liquidations could reach $500 million if SOL rebounds above $113 this week. On the other hand, if SOL continues to fall towards $86, long positions could suffer losses of over $142 million in liquidation.
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2. Hyper Liquid (HYPE)
HyperLiquid (HYPE) is one of the few altcoins that has been able to maintain a 50% rise since its January 21st low. Most other altcoins are making new lows.
HYPE’s liquidation map shows a relatively balanced situation between longs and shorts. If the current price is around $31, an increase to $35.5 could result in approximately $80 million in short liquidations. A fall towards $26 could result in around $80 million of long positions being liquidated.
HYPE’s ability to rise against the overall market trend already comes with risks. BeInCrypto’s report also shows that the market lacks sufficient liquidity to sustain the recovery, while also seeing significant capital outflows.
HYPE, on the other hand, has its own catalyst. This includes a 90% reduction in monthly team allocations. The demand for trading metal pairs on Hyperliquid is also supporting the price of the token.
Bulls and bears are neutralizing each other. For the past four days, HYPE has formed a continuous spinning top candlestick pattern. This type of formation often indicates that a large price movement may be coming, increasing liquidation risk.
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3.TRX
Recently, a woman named Teng Teng (Zeng Ying), who claims to be Justin Sun’s ex-girlfriend, accused him of manipulating the Tron (TRX) market in its early stages. He said Sun is suspected of instructing employees to register multiple Binance accounts with personal information in order to carry out coordinated trading activities.
These developments could spread negative sentiment among TRX holders, especially during a wave of panic selling.
Short-term traders are betting on further declines. The liquidation heatmap shows that potential short liquidations are predominant. These could reach close to $29 million if TRX rebounds above $0.31.
However, there are other signals that indicate TRX demand is also strengthening. Tron Inc. (NASDAQ: TRON) recently purchased an additional 173,051 TRX tokens at an average price of $0.29. The company’s total TRX reserves currently exceed 679.2 million TRX.
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The number of weekly active addresses on Tron has also steadily increased over the past few years. Currently, the number is 24.68 million. This shows that TRX demand continues to be supported even during a broad market decline.
While negative sentiment prevails, short sellers have the potential to reap short-term profits. But without a clear profit-taking plan, those gains can quickly disappear.
Each of these altcoins has its own story. However, as market volatility continues to increase, liquidation risk increases rapidly for both long and short traders.
“Total crypto liquidations over the past four days officially exceeded $5 billion, marking the largest wave of liquidations since October 10th.” -Kobeissi Letter reported.
As liquidation losses grow, retail investors may lack the funds to sustain buying pressure. This could send the market into a prolonged period of stagnation.
