Recent trends in the cryptocurrency market have shown stability, prompting investors to analyze different indicators for potential insights. Despite this stability, two altcoins have seen significant short-selling pressure, hinting at the possibility of an upcoming short squeeze.

Understanding the Mechanics of Short Squeezes

When traders take a short position in the crypto market, they put up collateral and set a liquidation price above the opening price of the position. This price acts as a trigger for closing the position and converting the collateral into cash if the asset's index price hits or exceeds this level. In addition, derivative exchanges use funding rates to balance the market based on the ratio of long to short positions. An increase in short positions leads short holders to pay interest to long holders, gradually depleting collateral and increasing the risk of liquidation.

Analyzing funding rates and liquidation heat maps can provide valuable insights into potential short squeeze opportunities in the cryptocurrency market. Data from CoinGlass points towards two altcoins that may experience a short squeeze in the near future.

Altcoins Drawing Attention: BNB and Bitcoin Cash

One notable altcoin under pressure is Binance Coin (BNB), facing significant short interest due to news related to Binance's former CEO, Changpeng Zhao (CZ). This perceived downward trend has disrupted the market balance, setting the stage for a short squeeze scenario in a predominantly bearish environment.

Similarly, Bitcoin Cash (BCH) emerges as a potential candidate for a short squeeze with a negative funding rate. Short sellers in BCH are currently paying interest to long positions at a rate of up to 12%, making it a noteworthy altcoin in terms of short squeeze potential.

The liquidation heat map of BCH highlights key liquidity zones at specific price ranges, further supporting the likelihood of a short squeeze scenario. However, investors should exercise caution as negative funding rates and increased liquidation positions alone may not be sufficient for a successful short squeeze. Positive market sentiment is also crucial for driving the necessary price increase.

The original article can be found on COINTURK NEWS: Insights on Potential Short Squeezes in Crypto Market