finbold.com
Short squeeze events can happen when bearish cryptocurrency traders dominate the market, opening short positions and creating upwards high liquidity. The price increases as these short positions are liquidated, triggering more liquidations in a cascade.
Notably, Bitcoin (BTC) recently suffered a short squeeze, as alerted by Finbold at the start of this week. The $42,000 is still a target, but the sentiment shift has favored long positions, which could encourage a retracement. BTC is trading at $41,100 by press time.
In this context, most other cryptocurrencies have followed the leader with smaller short squeezes, cleaning liquidity pools upwards.
Finbold turned to CoinGlass derivatives and Open Interest (OI) data on January 26 to spot the laggards. In particular, Curve DAO (CRV) and XRP have accumulated liquidations that could become targets, increasing the price.
Short squeeze alert for Curve (CRV)
Curve is trading at $0.466 with a 3.8% price surge in the last 24 hours. However, 52.74% of its 24-hour volume was made of short positions, for a total of $81.64 million.
Also notable is the OI/Market cap ratio at 0.1359, proportionally high to the cryptocurrency market. This means there are $68.26 million open contracts, shorting or longing CRV’s $502.39 million market cap.
As for the liquidation targets, CRV has many small liquidity pools from $0.47 to $0.55. Therefore, Curve has the potential to skyrocket through this short squeeze for over 17% gains.
XRP (XRP) could see short liquidations
Further developments on the SEC vs. Ripple case continue to affect investors’ confidence and directly impact XRP price action.
Interestingly, this uncertainty is reflected in a low speculative volume and open interest compared to the token’s capitalization. XRP currently has an OI/Market cap ratio of 0.018, and the market should not expect huge price movements.
Nevertheless, XRP is one of the only remaining cryptocurrencies with some potential to short squeeze, besides CRV to $0.55 and Bitcoin to $42,000.
The sixth-largest cryptocurrency has concentrated liquidity just above the current price in the weekly time frame. XRP trades at $0.522 by press time, with potential liquidations at $0.525. After that, a smaller remaining open interest could drive prices to the $0.54 or the $0.56 zones.
Still, the cryptocurrency market is unpredictable, and liquidity can easily shift following news and narratives. Everything could change in the blink of an eye, so investors must remain cautious and monitor the markets.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.