After Bitcoin’s bull rally to $71000 and its pullback to the $69000 range, the cryptocurrency market entered a consolidation phase, which may transition into a bearish correction. Simultaneously, we observe an increase in open interest in short positions on some cryptocurrencies.
Short squeezing occurs when a sudden price increase triggers the closure of open short positions. This event reinforces the upward trend, further pushing prices higher.
It is important to identify large liquidity pools, as they will help traders find profitable opportunities. At the moment, the potential for short squeezing is shown by the cryptocurrencies Solana (SOL) and Avalanche (AVAX).
Solana (SOL) Over the past couple of weeks, Solana’s open interest has been at historical highs, following the price dynamics of the native token SOL. Currently, futures contracts amount to over $3 billion. Most of this sum is attributed to short positions, creating large liquidity pools for growth. With significant accumulation at levels of $192, $194, and $197, they will become targets for a short squeeze next week.
On the evening of March 29, SOL was trading at $186, and reaching these targets will provide a potential increase of 6.5%. Avalanche (AVAX) One of Solana’s most promising competitors, Avalanche, may also be subject to short squeezing next week. However, Avalanche’s open interest is less than $500 million, with capital inflow significantly lower than the competing token. Similar to SOL, the majority of market interest in Avalanche is concentrated on shorts. The scale target for liquidation is set at the price level of $59.5 with a potential profit of over 11.5% from the current $53.35. Despite the corresponding potential, the liquidation of futures for short positions does not guarantee a short squeeze. The cryptocurrency market is highly volatile and prone to sudden changes.