According to the Crypto Fear & Greed Index, investor sentiment in the cryptocurrency market has succumbed to fear in the third week of December; the index is currently at an extreme fear level. The impact of this gloomy atmosphere has brought short positions to the forefront.
However, some altcoins may cause a collective liquidation of short positions with their unique catalysts. So, which altcoins are these and what specific risks do they face?
1. Solana (SOL)
The 7-day liquidation heatmap prepared for SOL shows that the potential liquidation volume in short positions is exactly twice that of long positions.
In particular, if SOL rises to $147 this week, traders holding short positions may face total losses of up to $1 billion. Conversely, if the SOL price drops below $120, long traders will face liquidation risks of approximately $500 million.
Several key indicators suggest that traders opening short positions this week need to be more cautious.
Firstly: SOL ETFs recorded positive inflows for seven consecutive days last week. In particular, the Bitwise SOL ETF has attracted continuous positive cash inflows for exactly 33 days since its launch and currently holds over $600 million in SOL. This situation indicates that institutional demand remains strong.
Secondly: SOL has established strong support at the $130 level over the past four weeks. Additionally, the expansion of XRP's DeFi usage on Solana via Hex Trust has created an optimistic atmosphere in the market.
As a result, the likelihood of recovery for SOL this week appears strong, which could trigger short liquidations.
2. Cardano (ADA)
Similar to SOL, the overall negative investor sentiment in ADA has led short-term traders in the derivatives market to allocate more capital and leverage to short positions.
This stance has significantly increased the total short liquidation volume. If ADA climbs to $0.45 this week, short positions may face liquidation risks totaling up to $50 million. Conversely, if the ADA price drops to $0.35, approximately $19.5 million in long positions may experience liquidation.
One of the most important factors that ADA short traders should consider to reduce their risk is the positive atmosphere surrounding the Midnight project.
Midnight Network is a new blockchain developed by Input Output Global (IOG), the company behind Cardano, and its founder Charles Hoskinson.
Midnight Network focuses on privacy-oriented and zero-knowledge proof (ZK-SNARKs) technology. The NIGHT token has gained over 150% in the last seven days. Furthermore, the project was awarded BeInCrypto's 'Rising Star of the Year.'
The increasing interest in NIGHT is also raising the demand for ADA. According to the Taptool trading platform, NIGHT has reached a trading volume of over 85 million ADA on decentralized exchanges (DEX) in the last five days. Furthermore, investors holding ADA can earn NIGHT by staking their ADA.
3. PIPPIN
PIPPIN has become one of the notable meme coins as we approach the end of the year. Its market value skyrocketed from under $60 million to over $350 million in three weeks.
According to the liquidation heat map, the total potential long liquidations are still greater than short liquidations. This means many short-term traders still believe that the upward trend will continue.
However, this expectation brings along a significant risk. According to the on-chain data platform Evening Trader Group, currently 93 wallets hold 73% of the total supply.
These wallets are divided into three main accumulation clusters. Each cluster has a unique origin and different trading habits. According to Evening Trader Group's analysis, this accumulation movement could be the main reason for the price increase. However, selling pressure could suddenly emerge.
Additionally, the account associated with the project (ThePippinCo) has not shared any updates since June. This silence has raised questions about the team's commitment to the project.
If PIPPIN drops below $0.30 this week, more than $9 million in long positions could be liquidated. If PIPPIN experiences a sudden dump like other manipulated meme tokens, this number could increase even further. You can check here for details.
