3 Altcoins That May See Significant Liquidations in Early January

As the year ends, short-term derivatives traders are holding long positions in several altcoins. However, the absence of strict stop-loss measures places these positions at risk of liquidation in early January.

Key Takeaways

Many traders hold long positions in altcoins like Solana (SOL), Zcash (ZEC), and Chainlink (LINK).
The liquidation maps show an imbalance, with long positions outpacing shorts significantly.
A potential price decline could lead to substantial long position liquidations for these altcoins.
Traders should be mindful of profit-taking strategies to mitigate liquidation risks.

Which altcoins are at risk, and why could they lead to major liquidation losses? This analysis delves into the details.

1. Solana (SOL)

Solana's 7-day liquidation map indicates a significant imbalance, with long liquidations greatly outnumbering short liquidations. Many long traders have solid reasons for maintaining their SOL positions at this time. A report from BeInCrypto emphasizes that historically, January has been a strong month for SOL’s price.

Additionally, a bullish Relative Strength Index (RSI) divergence supports expectations of a possible price recovery.

While long traders might see unrealized profits shortly, a lack of profit-taking strategies could make these long positions susceptible to liquidation. According to data from SoSoValue, SOL ETFs recently recorded their lowest weekly inflow since their launch, with net inflows dropping to only $13.14 million—over 93% lower than the nearly $200 million seen during the launch week.

Although no week has reported negative net flows, this dramatic decrease signals weakening demand for SOL ETFs, which could pressure SOL's price come early January. If SOL’s price dips to around $110, long liquidations could exceed $880 million.

2. Zcash (ZEC)

Much like SOL, ZEC’s liquidation map shows that traders are heavily investing in long positions. The amount of ZEC locked in Shielded Pools has risen again as of late December, and the price of ZEC rebounded significantly, climbing from approximately $300 to above $500. These factors bolster the argument for holding long positions.

Nevertheless, there are risks associated with aggressive trading. After a dramatic rally exceeding 70% in December, ZEC may be due for a technical correction. A pullback to retest previous resistance levels would be normal market behavior.

Profit-taking from early December buyers could drive this correction, creating selling pressure that puts long positions at risk. Moreover, a recent BeInCrypto report indicates that ZEC whales are reducing their exposure, reflecting increasing caution following the sharp recovery.

If ZEC's price falls to the $466 level in early January, long-position liquidations could surpass $78 million.

3. Chainlink (LINK)

Many traders seem confident that LINK will soon rebound from its current value of $12, having committed significant capital and leverage to long positions. Comments from CryptoPulse suggest that LINK is holding its demand zone and stabilizing. As long as this support level remains intact, the price could rise towards $13.5, $14, or $15. However, a drop below $11.5 would invalidate this optimistic setup, indicating potential downside risks.

A crucial indicator to watch is the increase in LINK reserves on Binance throughout December. Data from CryptoQuant indicates that the 7-day average of LINK reserves on Binance has ended its two-month downtrend and is now moving upward.

This trend suggests that LINK holders might be preparing to sell if prices show signs of recovery. The liquidation map indicates that should LINK's price fall to $11, cumulative long liquidations could reach around $40 million.

In conclusion, traders holding long positions in altcoins like Solana, Zcash, and Chainlink should proceed with caution and develop clear profit-taking strategies to protect against potential liquidation risks as we move into January.