Altcoins at Risk of Liquidation in Mid-December

The Crypto Fear & Greed Index indicates that during the third week of December, the cryptocurrency market is characterized by a prevailing sense of fear, with an extreme fear score. This negative sentiment has led to a predominance of short positions. Yet, various altcoins present specific situations that could trigger liquidations of these shorts. Let’s explore these altcoins and the risks they encounter.

Key Takeaways

The crypto market is currently experiencing high levels of fear, impacting trading strategies.
Solana (SOL) has positive indicators that could lead to short liquidations if prices rise.
Cardano (ADA) is showing potential due to new project developments, which may affect short positions.
PIPPIN, a meme coin, is gaining popularity but carries liquidation risks if prices decline.

1. Solana (SOL)

The liquidation heatmap for SOL over the past week reveals that the potential liquidation volume for short positions is double that of long positions. Specifically, if SOL sees a price increase to $147 this week, traders with short positions could face losses up to $1 billion. Conversely, if SOL drops below $120, long traders may see liquidations around $500 million.

Several factors indicate a need for caution among short traders this week. Notably, SOL ETFs experienced seven consecutive days of positive inflows last week. The Bitwise SOL ETF, in particular, has seen positive inflows for 33 straight days since its launch, currently holding more than $600 million in SOL. This trend signifies strong institutional demand.

Additionally, SOL has constructed robust support around the $130 mark over the past month. Moreover, positive developments regarding XRP's expansion of DeFi use cases on Solana via Hex Trust have bolstered market sentiment. Therefore, SOL appears primed for a potential recovery this week, which may lead to short liquidations.

2. Cardano (ADA)

Like SOL, Cardano (ADA) has experienced an increase in short-term derivatives traders opting for higher capital allocation and leverage on short positions due to negative market sentiment. This shift has amplified the volume of short liquidations.

If ADA rises to $0.45 this week, short positions could incur losses of up to $50 million. However, if ADA falls to $0.35, long positions might face liquidations of approximately $19.5 million.

One significant factor ADA short traders should monitor is the positive sentiment surrounding the Midnight project. This new blockchain is developed by Input Output Global (IOG), the company behind Cardano, founded by Charles Hoskinson. Midnight Network focuses on privacy through zero-knowledge proof technology, utilizing ZK-SNARKs. The NIGHT token has surged over 150% in just seven days, and the project recently won BeInCrypto’s “Breakthrough of the Year” award.

The growing demand for NIGHT is also supporting ADA prices. Data from the Taptool trading platform indicates that NIGHT recorded a trading volume exceeding 85 million ADA on decentralized exchanges over the past five days. Additionally, ADA holders can earn NIGHT by staking their ADA.

3. PIPPIN

PIPPIN, a meme coin, has attracted significant attention toward the end of the year, with its market capitalization jumping from below $60 million to over $350 million in just three weeks. The liquidation heatmap suggests that the cumulative potential for long liquidations exceeds that of short liquidations, indicating that many short-term traders remain optimistic about rising prices.

However, this optimism comes with notable risks. Analysis from the on-chain data firm Evening Trader Group shows that 93 wallets currently hold 73% of PIPPIN's total supply. These wallets are organized into three main accumulation clusters, with distinct behavioral patterns. Evening Trader Group suggests that such accumulation might be the driving factor behind the recent price surge, but it also raises concerns about impending selling pressure.

Moreover, the project's official account (ThePippinCo) has not posted any updates since June, prompting questions about the team's commitment. If PIPPIN’s price drops below $0.30 this week, over $9 million in long positions could face liquidation. The potential for more significant sell-offs exists if PIPPIN undergoes a sharp decline, akin to other meme tokens that have experienced manipulation.

This revised article presents the content clearly and is accessible for cryptocurrency newcomers while maintaining the original information's integrity.