The wider cryptocurrency market has retraced downward after December 17 saw Bitcoin (BTC) reach a new all-time high (ATH) price of approximately $106,490. Following the high, the price of BTC retreated to roughly $94,000, before a failed retesting of the $100,000 mark. Prices subsequently crashed below $93,000 but had recovered to $95,256 by press time, with year-to-date (YTD) returns at 126.67%.
While broad consensus states that this is just a temporary consolidation period before the market-wide rally continues, even temporary drops have a way of intensifying bearish sentiment. With short sellers having reaped significant rewards from this latest move to the downside, they have doubled down on their bets — in a move that leaves space for potential short squeezes.
To identify potential short-squeeze opportunities for January 2025, Finbold retrieved derivatives data from CoinGlass to select two cryptocurrencies that both exhibit high short volume and possess the potential for significant price appreciation.
Picks for you
A look at the data identified two promising candidates Aave (AAVE) and Hyperliquid (HYPE), both of which are well-established digital assets with significant market capitalizations.
Short volume for AAVE and HYPE is beginning to surge
Whereas some $140.63 million in long positions was opened in AAVE, $153.02 million was placed in short orders. At present, 52.11% of the daily open interest is on the short side.
Although Hyperliquid’s daily open interest is a tad less bearish, with 51.40% in favor of the short side, the total volume is significantly greater. In the last 24 hours, $424.17 million worth of HYPE shorts have been placed, whereas $401.14 million has been used to open long positions.
While this is generally lower than what is required for a short squeeze, if the pace continues, the open interest on both assets could swing even more to the bearish side by the end of January.
Readers should note that there is no guarantee that a short squeeze will happen with these cryptocurrencies. While the bears have a slight edge at present, a short squeeze requires a rapid and powerful pivot from bearish to bullish sentiment, with plenty of open positions in the previous direction.
However, with that being said, these are the two assets that experienced the most bearish shifts over the last 24 hours. If the pace continues into January, a lot of capital could be at risk.
Both AAVE and HYPE are likely going to benefit from platform improvements in 2025 — HYPE staking went live on December 30, providing a massive bullish catalyst for the asset, and the highly-anticipated launch of Aave V4, slated for early 2025, will doubtlessly do the same for AAVE.
Featured image via Shutterstock
