According to the Crypto Fear & Greed Index, sentiment in the crypto market is dominated by fear in the third week of December. The score is at extreme fear. This negative sentiment has favored short positions.
However, some altcoins have their own catalysts that can trigger liquidations of these short positions. Which altcoins are these and what specific risks are they facing?
1. Solana (SOL)
The 7-day liquidation heatmap for SOL shows that the potential liquidation volume of short positions is twice that of long positions.
If SOL rises to $147 this week, traders with short positions could face losses of up to $1 billion. However, if SOL falls below $120, long traders could see liquidations of about $500 million.
Various factors indicate that traders should be cautious with short positions this week.
Firstly, SOL ETFs recorded positive inflows for seven consecutive days last week. Notably, the Bitwise SOL ETF has had positive inflows for 33 days straight since its launch. This fund now holds more than $600 million in SOL. This indicates sustained institutional demand.
Additionally, SOL has built strong support around $130 over the past four weeks. Market sentiment has also improved due to positive news about XRP expanding its DeFi applications on Solana via Hex Trust.
As a result, SOL has a strong basis for recovery this week, which could cause short liquidations.
2. Cardano (ADA)
Like with SOL, the negative market sentiment has led ADA derivatives traders to deploy more capital and leverage on short positions for the short term.
As a result, the total short liquidation volume has significantly increased. If ADA rises to $0.45 this week, short positions could face losses of up to $50 million. Conversely, if ADA falls to $0.35, long positions could be liquidated for about $19.5 million.
An important point that ADA short traders must consider to mitigate risk is the positive sentiment surrounding 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, particularly ZK-SNARKs. The NIGHT token has increased by more than 150% in seven days. The project also won the 'Breakthrough of the Year' award from BeInCrypto.
The increasing demand for NIGHT leads to more demand for ADA. According to trading platform Taptool, the DEX trading volume of NIGHT in the past five days has exceeded 85 million ADA. Additionally, ADA holders can earn NIGHT by staking their ADA.
3. PIPPIN
PIPPIN is a meme coin that gained significant attention towards the end of the year. Its market capitalization rose in just three weeks from less than $60 million to over $350 million.
The liquidation heatmap indicates that the cumulative potential of long liquidations is higher than the short liquidation volume. This means that many short-term traders still expect the price to continue rising.
However, this expectation carries significant risk. A recent analysis from the on-chain data tracking account Evening Trader Group shows that 93 wallets currently hold 73% of the total supply.
These wallets are divided into three main groups of accumulation. Each group has its own origin and behavior. According to Evening Trader Group, this accumulation could be the primary cause of the recent price increase. On the other hand, selling pressure can emerge at any time.
Moreover, the project account (ThePippinCo) has not posted any updates since June. This silence has raised concerns about the team's commitment to the project.
If PIPPIN falls below $0.30 this week, more than $9 million in long positions could be liquidated. This amount could increase if PIPPIN suddenly drops sharply, similar to other manipulated meme tokens.
