In the volatile cryptocurrency market, each newly opened short position leaves behind liquidity. This creates the potential for a ‘short squeeze’. Therefore, these highly shorted cryptocurrencies generally have pump potential in the short term. Crypto analyst Vinicius Barbosa looks at 2 cryptocurrencies with high short squeeze potential this week.
‘2 cryptocurrencies with high short squeeze potential
Use data from CoinGlass on February 23 to analyze the derivatives market. In particular, we found two potential cryptocurrencies for a ‘short squeeze’ next week due to their large upward liquidity pools. Essentially, short sellers borrow a cryptocurrency to sell in the market. He then makes a profit by repurchasing at lower prices. This is when they close the position, either voluntarily or not.
However, traders leave collateral behind. It also agrees on a liquidation price if the short-sold cryptocurrency is pumped. A pump triggers these liquidations, closing traders’ positions and repurchasing the asset. Therefore, this fuels a price increase. We call this event ‘short squeeze’.
There is huge pump potential for Chainlink (LINK)!
First, Chainlink (LINK) has one of the largest ‘short squeeze’ potentials available with related liquidations at higher price levels. In particular, with $115,000 liquidated at $20.41, this could become a target for whales and market makers hunting short positions. LINK is currently trading below $18. This means a pump potential of over 13% for the next week.
However, Chainlink investors can liquidate their long positions slightly below current prices before moving up. This will help increase short positions and increase the possibility of ‘short squeeze’.
Bitcoin (BTC) will soon undergo a ‘short squeeze’!
Next up is the market leader Bitcoin (BTC). Bitcoin is currently consolidating in a range. This means there are several liquidations in both directions. On the weekly time frame, we see a heat map similar to Chainlink. Additionally, some smaller liquidity pools are slightly below current levels. On the other hand, the most significant liquidations are towards the $54,400 region and approximately $800 million of liquidity is available.
It is possible that a ‘short squeeze’ in Bitcoin next week will cause the price to rise above 6%. Thus, it will liquidate short-selling BTC holders. However, having these liquidity pools cannot guarantee a liquidation event. Prices of cryptocurrencies depend on many factors. Additionally, the market constantly changes as traders open and close positions. Therefore, investors need to play this game carefully by understanding the risks they are exposed to.
The opinions and predictions in the article belong to the analyst and are definitely not investment advice. cryptokoin.com We strongly recommend that you do your own research before investing.
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