Short-term derivatives traders have been maintaining long positions in various altcoins since the end of December. However, without strict stop-loss plans, these positions may face liquidation risk as early as January.
Which altcoins are at risk, and why could they cause significant liquidation losses? The following analysis explains it.
1. Solana (SOL)
Solana’s 7-day liquidation map shows a strong imbalance. The total number of long liquidations is much greater than the number of short liquidations.
Long traders now have good reasons to hold SOL positions.
According to a BeInCrypto report, historically, January is a strong month for the SOL price. There is also a bullish RSI divergence, which confirms expectations for a possible recovery.
Long traders can achieve unrealized profits in the coming days. However, without a profit-taking plan, these long positions may become vulnerable.
Data from SoSoValue shows that SOL ETFs have just recorded their weakest weekly inflow since launch. The net inflow last week was only $13.14 million. That's more than 93% lower than the nearly $200 million in the first week after launch.
So far, there hasn't been a week with negative net inflow, but this sharp decline clearly indicates that the demand for SOL ETFs is decreasing. This trend could put pressure on the SOL price in early January.
Long positions should therefore be used cautiously. If SOL drops to $110, cumulative long liquidations could rise to over $880 million.
2. Zcash (ZEC)
Similar to SOL, the liquidation map of ZEC shows that traders are putting a lot of capital and leverage into long positions.
ZEC locked in Shielded Pools increased again at the end of December. The ZEC price also rose sharply this month, from around $300 to above $500. These factors support holding long positions.
However, there can be risks from investors trading too aggressively. After a rise of more than 70% in December, ZEC could technically correct. A pullback to test the previous resistance again as support would be normal behavior.
Profit-taking by buyers from early December could cause such a correction. This selling pressure presents a liquidation risk for long positions.
Moreover, a recent BeInCrypto report states that ZEC whales are reducing their exposure. This behavior shows that there is more caution after the strong recovery.
If ZEC drops to the $466 zone in early January, long liquidations could exceed $78 million.
3. Chainlink (LINK)
Many traders are convinced that LINK will quickly recover from the current $12 level. They have put a lot of capital and leverage into long positions.
"LINK holds its demand zone and begins to stabilize. As long as this support holds, the price has room to rise towards $13.5, $14, and $15. But if we drop below $11.5, this pattern becomes invalid and there's a risk of further decline," responded CryptoPulse.
An important signal deserves attention: The LINK reserves on Binance increased in December.
Data from CryptoQuant shows that the 7-day average LINK reserves on Binance ended a two-month downward trend. The trend is now starting to rise again.
This change suggests that LINK holders may be preparing to sell when the price shows signs of recovery. According to the liquidation heatmap, cumulative long liquidations could rise to about $40 million if LINK drops to $11.