As of late December, short-term derivatives traders were heavily invested in various altcoins. However, without a solid stop-loss strategy, these positions could be at risk of liquidation as soon as January.
Which altcoins might be vulnerable and what potential losses could they incur? The following analysis sheds light on these concerns.
1. Solana (SOL)
The liquidation map for Solana indicates a significant imbalance, with long liquidations far outpacing short ones.
Long traders have sound reasons for maintaining SOL positions right now.
A report suggests that January has historically been a robust month for SOL’s performance. In addition, a bullish RSI divergence hints at possible recovery.
Long positions can lead to realized gains in just days. Yet, lacking a profit-taking strategy makes them susceptible to risk.
According to recent data, the SOL ETF has seen its weakest weekly inflows since it began, with only $13.14 million coming in, a staggering decline from approximately $200 million in its inaugural week.
While negative net flows haven’t appeared yet, this drop indicates waning demand for SOL, which could impact its price early in January.
Thus, caution is essential for long positions. If SOL dips to $110, the total long liquidations might surpass $880 million.
2. Zcash (ZEC)
Like SOL, ZEC’s liquidation map shows a strong leaning towards long positions by traders.
The capital locked in the ZEC shield pool has notably increased, particularly in late December. ZEC’s price also saw a robust increase from around $300 to over $500, reinforcing the rationale for long holdings.
However, there are risks associated with aggressive maneuvers. After a rise of over 70% in December, a technical correction seems plausible. This kind of pullback would involve testing previous resistance levels.
Profit-taking early in December could trigger this correction, creating selling pressure that risks liquidating long positions.
Moreover, recent reports indicate that ZEC whales are reducing their exposure, signaling heightened caution after a swift recovery.
If ZEC falls to around $466 in early January, the potential liquidation value could exceed $78 million.
3. Chain Link (LINK)
Many traders have optimism that LINK will soon rebound from its current level of $12, investing heavily in long positions.
“LINK maintains its demand zone and is starting to stabilize. As long as this support holds, the price has room to move higher towards $13.5, $14, and $15. A break below $11.5 will invalidate this setup and indicate downside risk,” noted a market analyst.
One notable signal is that Binance’s LINK reserves have been increasing throughout December.
Recent data shows that the average LINK reserves on Binance have stopped a two-month decline and are now on the rise.
This trend suggests that LINK holders might be gearing up to sell once prices start improving. The liquidation map indicates that if LINK were to drop to $11, the overall long liquidation figure could come close to $40 million.
