Cryptocurrency Traders and Short Squeezes
Cryptocurrency traders often engage in short positions during bearish phases and long positions during bull rallies. This behavior creates opportunities for profitable long or short squeezes orchestrated by whales and market makers.
Understanding Short Squeezes
Short positions involve betting on a cryptocurrency’s value dropping through a collateral deposit and a liquidation price above the current exchange rate. However, if the asset’s price surges and reaches this liquidation point, it can forcibly close traders’ positions, leading to a short squeeze. This event triggers a cascade of closures, pushing the price higher and clearing liquidity pools.
Short Squeeze Alert for Solana (SOL)
Solana (SOL) has experienced an increase in short positions over the past 24 hours, resulting in upward liquidity pools. Data retrieved from CoinGlass’s derivatives market shows that 52.92% of the $6.13 billion 24-hour volume is made up of short sellers, totaling $3.21 billion. The most likely target for liquidations is $119.47 per SOL, with over $820,000 already liquidated at this price. Currently trading at $106.37, Solana has seen a 6.78% decrease following a general drop in the crypto market.
Potential Short Squeeze for Sui Network (SUI)
Sui Network (SUI) is another coin with the potential for an imminent short squeeze due to a growing volume of short positions. Out of the $814.26 million 24-hour volume, $440 million is made up of shorts. The liquidation heatmap for SUI indicates even greater potential for a short squeeze compared to Solana’s historic liquidations in the weekly time frame. Relevant liquidity pools are located close to the current price of $1.66 per token, and reaching these pools could fuel a pump, potentially leading to more liquidations above the $1.95 zone.
Changing Liquidity Pools and Managing Risk
It’s important to note that short sellers can avoid liquidation by adding more collateral or closing their positions. As a result, liquidity pools can quickly change as the market adjusts to recent developments. While Solana and Sui Network may face short squeezes this week due to increased short positions and liquidations, it’s crucial for investors to remain cautious and properly manage risk in this volatile and unpredictable market.
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