Cryptocurrency Traders and Long/Short Squeezes
Cryptocurrency traders often take advantage of price trends by opening short positions in bearish markets and long positions in bullish runs. However, this creates an opportunity for whales and market makers to orchestrate profitable long and short squeezes.
Understanding Short Squeezes
Short squeezes occur when traders commit to a liquidation price above current levels while opening short positions. If the cryptocurrency’s price rises instead of falling, it may reach the liquidation price and close the traders’ positions. These series of liquidations force the price upward, clearing liquidity pools and benefiting market makers.
Chainlink (LINK) Short Squeeze Alert
Chainlink (LINK) has experienced a surge in opened short positions, resulting in upward liquidity pools. According to data from CoinGlass’s liquidation heatmap on February 16, the most likely target for a short squeeze is $20.60 per LINK, with $595,560 worth of liquidations at this price. Reaching this pool could potentially drive the price even higher above the $21 zone.
LTC Potential for Short Squeeze
Litecoin (LTC) is another cryptocurrency that could be prone to a short squeeze due to its growing volume of short positions. Similar to Chainlink, there is a significant liquidity pool near LTC’s current prices. LTC is currently trading at around $70.60, with over $1 million in liquidations at multiple prices from $71 to $72. A short squeeze could potentially push Litecoin towards the $74 level for approximately 5% gains.
Managing Risk and Liquidity Pools
To avoid liquidation, traders can either close their positions or add more collateral to their existing contracts. It’s important to note that liquidity pools can change over time as the market adjusts to new information. Therefore, it is crucial for investors to remain cautious and properly manage risk while speculating on liquid markets.
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