According to the Crypto Fear & Greed Index, the sentiment in the cryptocurrency markets during the third week of December is still dominated by fear, with scores reaching extreme fear. This negative sentiment has given an advantage to short positions.
However, several altcoins have their own catalysts that could trigger the liquidation of these short positions. Which altcoins are involved, and what risks are associated with them?
1. Solana (SOL)
The 7-day liquidation heat map for SOL shows that the potential liquidation volume of short positions is double that of long positions.
If SOL rises to 147 dollars this week, traders with short positions could suffer losses of up to one billion dollars. Conversely, if SOL drops below 120 dollars, long traders' liquidations could amount to about 500 million dollars.
Many factors suggest that holders of short positions should be cautious this week.
Firstly, SOL ETFs registered seven consecutive days of positive investments last week. In particular, the Bitwise SOL ETF has maintained a positive investment flow for 33 consecutive days since its launch. The portfolio currently holds over 600 million dollars worth of SOL. This demonstrates that institutional demand remains strong.
Furthermore, SOL has established strong support around the 130 dollar level over the past four weeks. Positive news about expanding XRP's DeFi use case in Solana through Hex Trust has improved market sentiment.
Thus, SOL has strong fundamentals for a rebound this week, which could lead to short liquidations.
2. Cardano (ADA)
Also, the negative market sentiment in ADA has led derivative traders to increase capital usage and leverage in short positions.
This action has significantly increased the total amount of short liquidations. If ADA rises to 0.45 dollars this week, short positions could face losses of up to 50 million dollars. Conversely, if ADA drops to 0.35 dollars, long positions could face liquidation of about 19.5 million dollars.
One key aspect that ADA short sellers should consider to reduce risks is the positive sentiment surrounding the Midnight project.
Midnight Network is a new blockchain developed by Input Output Global (IOG), the team behind Cardano, and founded by Charles Hoskinson.
Midnight Network focuses on privacy using zero-knowledge proofs, particularly the ZK-SNARK technique. The NIGHT token has risen over 150% in the last seven days. The project also won BeInCrypton's 'Breakthrough of the Year' award.
The growing demand for NIGHT also increases the demand for ADA. According to the Taptool trading platform, NIGHT recorded DEX exchanges worth over 85 million ADA in the past five days. Additionally, ADA holders can earn NIGHT tokens by staking their ADA.
3. PIPPIN
PIPPIN is a meme coin that gained significant attention at the end of the year. Its market value rose from under 60 million to over 350 million dollars in just three weeks.
The liquidation heat map indicates that the accumulated potential long liquidations are still greater than short liquidations. This suggests that many short-term traders expect the price increase to continue.
However, there is a significant risk associated with such an expectation. An account tracking blockchain data, Evening Trader Group, recently analyzed that 93 wallets control 73% of the total supply.
These wallets are divided into three main accumulation centers. Each group has its own specific origins and behavioral patterns. According to the Evening Trader Group, this accumulation could be the primary reason for the price increase. On the other hand, selling pressure can appear at any time.
Additionally, the account related to the project (ThePippinCo) has not released updates since June. This silence has raised concerns about the team's commitment to the project.
If PIPPIN falls below 0.30 dollars this week, long positions worth over 9 million dollars may be liquidated. This figure could increase further if PIPPIN experiences a sharp decline, as other manipulated meme coins have.
