This week started with Bitcoin (BTC) rallying around $4,000, registering a 10% gain from its lowest to highest price on January 8th. Some cryptocurrencies followed the leader, outperforming the cryptocurrency market and increasing its capitalization dominance to over 54%.
Still, some cryptocurrencies are laggards in this bull rally as they are still dominated by short positions and remaining liquidity is on the upside. These higher-priced liquidity pools could become targets for market makers and encourage short squeeze liquidation events, potentially driving prices higher.
Essentially, a short squeeze occurs when short positions are massively liquidated. These liquidations force the purchase of the respective cryptocurrency, which increases the price and leads to new liquidations at even higher prices in a spiral.
Based on data from CoinGlass on January 9, Finbold specifically identified XRP (XRP) and BNB Chain (BNB) as two cryptocurrencies to keep an eye on.
Will XRP skyrocket on short liquidations?
Notably, XRP’s liquidation heatmap shows three pools with higher liquidity on the three-day time frame. They are at $0.583, $0.590 and $0.592, encouraging a short squeeze on these prices.
XRP 3-day liquidation heatmap. Source: CoinGlass
However, it is important to understand that these are relatively low liquidity pools, each worth no more than $1,560. This is due to significantly low XRP volumes in the derivatives market, which worsened in the last 24 hours and fell by 45%.
XRP is trading at $0.569 at press time, with only $577.09 million in short positions opened in the last 24 hours. Total daily volume is $1.04 billion, so short sellers dominate with 51.82% of short interest.
XRP derivatives volume data. Source: CoinGlass
Short squeeze alert for BNB on January 9th
Meanwhile, the BNB chain's native token is being massively shorted, resulting in attractive upside liquidity pools. There are three main short squeeze price targets at $311.9, $312.4 and $313.3, all with liquidations worth more than $1 million.
BNB 3-day liquidation heatmap. Source: CoinGlass
Interestingly, BNB is more likely to experience a short squeeze than XRP due to the higher liquidity available. The token is currently trading at $304.97, but the 24-hour volume is lower than the first token. BNB opened $367.36 million worth of short positions on the day, representing 50.36% of the $705.9 million volume.
Volume data for BNB derivatives. Source: CoinGlass
However, the low volume of both cryptocurrencies also means that this scenario can change at any time. If significant volume for long positions increases in the market, liquidity could favor bulls' liquidations and stop the hunt, which would drive the price lower.
Disclaimer: The content of this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.
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