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Short squeeze alert for next week: Two cryptocurrencies with pump potential

Short squeeze alert for next week: Two cryptocurrencies with pump potential

Cryptocurrency traders usually ride price trends, opening short positions when the market is bearish and long positions in bull runs. This creates the perfect scenario for profitable long and short squeezes orchestrated by whales and market makers.

Essentially, traders commit to a liquidation price above current levels when they open short positions, betting the cryptocurrency will plummet. If the asset pumps instead, it may reach the liquidation price and close the traders’ positions.

In particular, a short squeeze is made of a series of such liquidations. They force the price upward, clearing the available liquidity pools and rewarding the makers.

Notably, Chainlink (LINK) has seen an increase in opened short positions in the last 24 hours, creating upward liquidity pools. Finbold retrieved this data from CoinGlass’s liquidation heatmap on February 16.

The most likely target is $20.60 per LINK, with $595,560 worth of liquidations at this price. Furthermore, reaching this pool could fuel a pump seeking more liquidations above the $21 zone.

Chainlink is trading slightly below $20 and close to the spotted targets for a short squeeze. 

LINK 1-week liquidation heatmap. Source: CoinGlass

Litecoin (LTC) could pump with a short squeeze

Another coin with a potential imminent short squeeze is Litecoin (LTC), which has had a growing volume of short positions.

Similarly to LINK, the most relevant liquidity pool is close to Litecoin’s current prices. LTC is trading at $70.60 with over $1 million liquidations in multiple prices from $71 to $72.

Litecoin could seek higher grounds in the $74 level in the case of a short squeeze for around 5% gains.

LTC 1-week liquidation heatmap. Source: CoinGlass

However, traders can avoid liquidation by either closing their positions or adding more collateral to the already opened contracts. Therefore, liquidity pools can dynamically change over time as the market adjusts to new information.

In summary, Chainlink and Litecoin could suffer a short squeeze next week due to increased short positions this week. But cryptocurrencies are volatile and unpredictable, changing every minute. Investors must remain cautious and properly manage risk while speculating on liquid markets.

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

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