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Short squeeze alert: Two cryptocurrencies that could soar

Short squeeze alert: Two cryptocurrencies that could soar

Bitcoin (BTC) lost over 15% of its value from January 11 highs to its lows on January 12. This sudden price shift caused a bearish sentiment to surge, encouraging traders to bet against the leading cryptocurrency. In this context, Bitcoin could be on the verge of seeing a short squeeze, making its price soar.

Not only did Bitcoin suffer from that, but other cryptocurrencies also experienced sell-offs and more short positions against them. For example, Ethereum (ETH) lost nearly 10% from its highest price on January 11 to its lowest the next day.

Interestingly, traders create liquidity pools upward by opening a short position, which can become market makers’ targets. If the cryptocurrency reaches these liquidity pools, the positions are closed or liquidated, skyrocketing the price further. This is what is called a short squeeze.

Finbold turned to CoinGlass’s liquidation heatmaps on January 16 to understand the risks of a short-squeeze event.

Bitcoin (BTC) could reach $50,000 with a short squeeze

Notably, Bitcoin has a liquidity pool worth $575.95 million at $49,281 of the weekly time frame. Before that, CoinGlass’ chart shows huge amounts of awaiting short position liquidations from the current prices at around $42,800.

Bitcoin could soar 15% by erasing this available liquidity, an easy target for bullish whales. Moreover, there is almost no liquidity to the downside, favoring a price pump at any moment this or the next week.

Short squeeze alert: Two cryptocurrencies that could soar

Short squeeze alert for Ethereum (ETH)

In the meantime, Ethereum has a slightly more balanced scenario with some distributed liquidity downwards. Nevertheless, the most relevant weight points to $2,700, with $40 million in concentrated liquidations waiting for a short squeeze at this price.

Breaking the closest positions at $2,560 to $2,570 would be crucial to start a liquidation event. Reaching the highest target would mean over 8% gains for Ethereum investors buying at current prices, slightly above $2,500.

Short squeeze alert: Two cryptocurrencies that could soar

However, it is important to understand that concentrated liquidity does not guarantee these liquidations will occur. Demand is required for prices to increase, which is necessary to trigger a short squeeze. In conclusion, the cryptocurrency market is unpredictable, and everything could change in a matter of hours or even minutes.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.