This week started with a $4,000 Bitcoin (BTC) rally, accruing 10% gains from the lowest to the highest price on January 8. Some cryptocurrencies followed the leader, which overperformed the cryptocurrency market, increasing its capitalization dominance to over 54%.
Nevertheless, some cryptocurrencies are laggards in this bull rally, still dominated by short positions, with remaining liquidity upwards. These higher-priced liquidity pools could become market makers’ targets, favoring short-squeeze liquidation events, potentially driving prices up.
Essentially, a short squeeze happens when short positions get massively liquidated. These liquidations force purchases of the given cryptocurrency, increasing the price and bringing new liquidations for even higher prices at a spiral event.
XRP 3-day liquidation heatmap. Source: CoinGlass
However, it is important to understand that these are relatively low liquidity pools worth no more than $1,560 each. This is due to the significantly low volume of XRP in the derivatives market, which got worse in the last 24 hours, dropping 45%.
XRP is trading at $0.569 by press time, with only $577.09 million in short positions opened in the last 24 hours. The total daily volume is $1.04 billion, making short-sellers dominate by 51.82% of the short-term interest.
XRP derivatives volume data. Source: CoinGlass
Short squeeze alert for BNB on January 9
In the meantime, BNB Chain’s native token is being massively shorted, with attractive liquidity pools upwards. There are three main short-squeeze price targets at $311.9, $312.4, and $313.3, all with more than $1 million worth of liquidations.
BNB 3-day liquidation heatmap. Source: CoinGlass
Interestingly, BNB is more likely to see a short squeeze than XRP due to its higher available liquidity. The token currently trades at $304.97, but the 24-hour volume is lower than the first token. BNB has $367.36 million short positions opened in the day, with 50.36% of the $705.9 million volume.
BNB derivatives volume data. Source: CoinGlass
However, the low volume for both cryptocurrencies also means that this scenario could easily shift at any moment. If a significant volume for long positions surges in the market, liquidity could favor bulls’ liquidations and stop hunts, driving the price downwards.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
