According to the Crypto Fear & Greed Index, the sentiment of the crypto market in the third week of December remains dominated by fear, with an extreme fear score. This negative sentiment has caused short positions to gain the upper hand.
However, several altcoins have their own catalysts that could trigger liquidations of these short positions. What are these altcoins and what specific risks do they face?
1. Solana (SOL)
The heatmap of liquidations over 7 days for SOL shows that the potential volume of short position liquidations is double that of long positions.
In particular, if SOL were to rise this week to $147, short position traders could record losses of up to 1 billion dollars. Conversely, if SOL fell below $120, long position traders could face liquidations of about 500 million dollars.
Several factors suggest that traders should be cautious in maintaining short positions this week.
First, ETFs on SOL recorded seven consecutive days of positive inflows last week. In particular, Bitwise's ETF on SOL has maintained positive inflows for 33 consecutive days since its launch. It currently holds over 600 million dollars in SOL. This trend indicates a steady institutional demand.
Secondly, SOL has built strong support around the $130 level in the last four weeks. Additionally, positive news regarding the expansion of XRP's DeFi use cases by Ripple on Solana through Hex Trust has improved market sentiment.
Consequently, SOL has solid motivations for a recovery this week, which could trigger short liquidations.
2. Cardano (ADA)
As with SOL, the general negative market sentiment has pushed derivative traders on ADA in the short term to increase capital allocation and leverage on short positions.
This behavior has significantly increased the total volume of short liquidations. If ADA were to rise to $0.45 this week, short positions could suffer losses of up to 50 million dollars. Conversely, if ADA were to fall to $0.35, long positions would risk liquidations of about 19.5 million dollars.
A key factor that short traders on ADA should consider to reduce risk is the positive sentiment generated by the Midnight project.
Midnight Network is a new blockchain developed by Input Output Global (IOG), the company behind Cardano, founded by Charles Hoskinson.
Midnight Network focuses on privacy through zero-knowledge proof technology, specifically ZK-SNARKs. The NIGHT token has recorded an increase of over 150% in the last seven days. The project also won the award for 'Breakthrough of the Year' from BeInCrypto.
The growing demand for NIGHT is also driving demand for ADA. According to the trading platform Taptool, NIGHT has recorded trading volumes on DEX exceeding 85 million ADA in the last five days. Additionally, ADA holders can earn NIGHT by staking their ADA.
3. Pippin
PIPPIN is a meme coin that attracted a lot of attention towards the end of the year. Its market capitalization jumped from less than 60 million dollars to over 350 million dollars in just three weeks.
The liquidation heatmap indicates that the potential total of long liquidations remains higher than that of short liquidations. This data suggests that many short-term traders still expect a further price increase.
However, this expectation carries significant risks. A recent analysis by the on-chain tracking account Evening Trader Group revealed that 93 wallets currently hold 73% of the total supply.
These wallets are divided into three main accumulation clusters. Each cluster shows distinct origins and behavioral patterns. According to Evening Trader Group, this accumulation could be the main driver behind the price increase. On the other hand, selling pressure could emerge at any time.
Moreover, the account linked to the project (ThePippinCo) has not published any updates since June. This silence has raised doubts about the team's commitment to the project.
If PIPPIN were to fall below $0.30 this week, over 9 million dollars in long positions could be liquidated. This figure could be even higher if PIPPIN were to experience a sudden dump, similar to what happened to other manipulated meme tokens.
