Recent events in the cryptocurrency market have completely changed the sentiment from neutral to bullish. The SEC finally approved Bitcoin spot ETFs, triggering an uptrend for most cryptocurrencies.
In this case, traders closed millions of dollars worth of short positions, reducing the likelihood of short squeezes. However, it is still possible to find small pools of liquidity in the market that can quickly become a target for market makers.
By opening a short position, traders create upward pools of liquidity due to stop losses and predefined margin call prices. When the cryptocurrency reaches these prices, positions are essentially closed or liquidated, causing the price to skyrocket for further liquidity pools. This is called a short squeeze.
In particular, Dogecoin (DOGE) and BNB Chain (BNB) still have some liquidity at higher price levels despite their low volume. Finbold used data from CoinGlass retrieved on January 11th.
Short Squeeze Alert for Dogecoin (DOGE)
Dogecoin is trading at $0.08483 at press time, up 7.18% in the last 24 hours. However, DOGE is experiencing a 32% volume loss of $1.33 billion in derivatives trading. Of this, $703.37 million (51.18%) is in recently opened short positions.
DOGE derivatives market volume. Source: CoinGlass
As can be seen in the heatmap below, these short sellers could help create higher liquidity pools. Notably, the weekly liquidation chart shows a concentration above $0.086. Additionally, DOGE has already started liquidating some positions as the leading meme coin approaches this price range.
DOGE 1-week liquidation heatmap. Source: CoinGlass
The BNB Chain (BNB) is already shorted; is there more?
Meanwhile, the BNB has already proven the efficiency of liquidity pool analysis. On January 9th, Finbold issued a short squeeze warning for the token, which happened as expected. Currently, BNB chain is trading at $315, with both rising and falling liquidity.
BNB 1-week liquidation heatmap. Source: CoinGlass
In conclusion, the low volume of the two cryptocurrencies could prevent a short squeeze. Even then, the price could continue to rise if the market maintains bullish momentum.
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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