3 Altcoins Facing Significant Liquidation Risks in November's Third Week

As November progresses, the altcoin market cap has dipped below $1 trillion, prompting concerns about potential volatility and large-scale liquidations as investor sentiment hits a low point. In this context, which altcoins are more at risk and what unique factors should be monitored? Let’s explore.

Key Takeaways

The total altcoin market cap is currently below $1 trillion, indicating a challenging environment.
Ethereum (ETH) shows significant potential for liquidation risk on the Short side if prices rebound.
Solana (SOL) is also at risk, with a strong imbalance favoring Short liquidations.
Zcash (ZEC) faces liquidation risks primarily from Long traders due to market corrections.
Monitoring liquidity maps and market sentiment can provide insights into potential price movements.

Understanding Ethereum's Liquidation Dynamics

Ethereum's liquidation map reveals a notable disparity in potential liquidation amounts between Long and Short positions. Traders have been favoring Short positions, meaning they could incur significant losses if ETH bounces back this week.

According to Coinglass, if ETH surpasses $3,500, over $3 billion in Short positions might face liquidation. Conversely, a drop below $2,700 would only provoke approximately $1.2 billion in Long liquidations.

Despite the prevailing bearish sentiment—highlighted by recent ETH ETF outflows totaling $728.3 million and crypto entrepreneur Arthur Hayes’ recent ETH sell-off—technical analysis shows ETH is poised at a major support zone around $3,100. This could serve as a springboard for a potential price recovery.

Additionally, the sentiment indicator for ETH has reached extreme fear levels, a historical marker that often precedes a sharp price rebound. Buying during fear and selling during greed could be a profitable strategy moving forward.

Analyzing Solana's Market Position

Similarly to Ethereum, Solana's liquidation map indicates a significant tilt towards Short liquidations. The recent drop below $150 has led many traders to anticipate a further decline towards $100. This bearish outlook is shared not only by retail investors but also by larger investors or 'whales'.

However, recent data from SoSoValue highlights a different narrative, with U.S. SOL ETFs experiencing a net inflow of over $12 million on November 14 and more than $46 million throughout the week. This suggests that there is still strong ETF demand, potentially providing a support base for SOL.

If SOL manages to climb to $156, Short liquidations could reach almost $800 million, while a decline to $120 could result in approximately $350 million in Long liquidations.

Evaluating Zcash's Liquidation Risks

Differing from ETH and SOL, Zcoin’s liquidation map suggests that Long traders are at greater risk of liquidation. The prevailing sentiment among traders is that ZEC will continue to achieve higher price levels in November, driven by a significant increase in the locked Zcash Shielded Pool and optimistic price forecasts suggesting potential peaks at $10,000.

Despite this positive outlook, ZEC has repeatedly faced resistance around the $700 threshold, leading some analysts to speculate a possible pullback. If ZEC dips below $600, Long liquidations might exceed $123 million.

Furthermore, Coinglass reports that ZEC’s total open interest reached a historic high of $1.38 billion in November, indicating a substantial level of leveraged exposure that increases the likelihood of volatile market movements and large liquidations.

Therefore, while holding Long positions in ZEC could yield short-term profits, it's crucial for traders to establish clear profit-taking and stop-loss strategies to mitigate liquidation risks.

By keeping an eye on these altcoins and understanding their liquidation risks based on market sentiment and technical indicators, investors can better navigate the volatile landscape of cryptocurrency trading.