Crypto Derivatives Volume Surges, Leading to Potential Short Squeezes
Crypto derivatives volume has experienced a significant increase, which has resulted in potential imbalances and the possibility of liquidation events. This surge in volume has led to an increase in short positions for certain cryptocurrencies, raising the potential for short squeezes if these positions are liquidated.
The total capitalization of the cryptocurrency market has reached a 10-day high of $1.614 trillion, indicating a 1.5% increase for the day. If the total market cap surpasses the highs seen earlier this month, cryptocurrencies with high levels of short positions may experience short squeezes.
Increased Short Positions for Dogecoin (DOGE)
Dogecoin (DOGE) has emerged as one cryptocurrency with a notable increase in short positions. At the time of writing, DOGE is trading at $0.0926, with a 2.2% increase over the past 24 hours. The open short positions for DOGE amount to $514.56 million, accounting for 51.31% of its daily open interest.
This substantial value of short positions is nearly equivalent to DOGE’s 24-hour spot exchange volume of $550.27 million. Consequently, a liquidation event resulting from a short squeeze could have a significant impact on DOGE’s price.
Shorting DYDX on December 21
DYDX is another cryptocurrency that has seen an increase in short positions on December 21. Currently trading at $2.957, DYDX has accumulated $188.57 million (53.06%) in shorts within this timeframe.
An interesting observation is that DYDX only has $132.69 million in 24-hour volume, indicating a larger number of short positions compared to the trading activity on multiple markets, as reported by CoinMarketCap.
However, for a short squeeze to occur, there needs to be a shift in market sentiment from bearish to bullish. DYDX has recently undergone significant changes and token migration, along with a massive token unlock that accounts for over 80% of its circulating supply. These factors may have influenced investors’ perception of the digital asset’s value.
No Guarantees, Conduct Your Own Research
It is important to note that there are no guarantees that these cryptocurrencies will experience short squeezes. Traders should conduct their own research and consider additional data to make informed financial decisions.
Hot Take: Potential Short Squeezes Could Impact Dogecoin and DYDX
Crypto derivatives volume has surged, leading to the possibility of liquidation events and potential short squeezes for certain cryptocurrencies. Dogecoin (DOGE) and DYDX have seen increased short positions, making them susceptible to short squeezes if these positions are liquidated. DOGE has a significant amount of open short positions relative to its daily open interest, while DYDX has accumulated shorts that surpass its 24-hour volume. However, market sentiment plays a crucial role in determining whether a short squeeze will occur. It is essential for traders to conduct thorough research and analyze complementary data before making any financial decisions.
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