Most cryptocurrencies have accumulated huge losses in the past two weeks, with a sentiment shift from greed to fear. The currently bearish dominance has favored crypto short-sellers, who could now be exposed to a possible short squeeze.
In a sell-the-news event, Bitcoin (BTC) dropped below $40,000 in the second week following the Bitcoin spot ETF approval. The cryptocurrency market followed the leader, losing over $325 billion in capitalization since January 11’s peak.
Notably, this movement attracted bearish traders, and the market saw an increase in short positions for multiple cryptocurrencies. Therefore, cryptocurrency exchanges register accumulated liquidity upwards, which could trigger short-squeeze events at any moment.
BTC 1-week liquidation heatmap on January 23. Source: CoinGlass
Ethereum (ETH) could skyrocket to above $2,500
Meanwhile, the second-largest cryptocurrency by market cap is also among the best candidates for this week’s short squeeze. Ethereum (ETH) could experience a 13% increase from its current price of $2,200 to the concentrated liquidity at $2,500.
ETH 1-week liquidation heatmap on January 23. Source: CoinGlass
However, it is important to understand that high liquidity pools do not guarantee a short-squeeze event. These cryptocurrencies must face an increased demand for a first price increase that can trigger the first short liquidations.
For that, the cryptocurrency trading sentiment must turn bullish, which is still uncertain. Investors must remain cautious as prices could keep consolidating for some time during these falls or drop even further.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
