As March ends, traders in the cryptocurrency market are searching for indications of which cryptocurrencies may experience significant growth in April. One key factor to consider is the level of open interest in the derivatives market, as it can suggest the possibility of short squeezes in the coming weeks.
The current prevalence of short positions in the market has the potential to lead to substantial liquidations in specific cryptocurrencies, pushing their prices higher. Traders establish a liquidation price to open short positions against cryptocurrencies they believe will decrease in value. If the asset reaches this liquidation price, the position is closed through repurchasing the asset.
To that end, Finbold analyzed data from CoinGlass on March 31 and identified two cryptocurrencies with short squeeze potential in April.
Ethereum (ETH)
The total open interest in Ethereum (ETH) futures has soared to over $13 billion, reaching record highs. This has resulted in significant liquidity pools at two price levels - $3,700 and above $4,100. Achieving these price targets could trigger a short squeeze and cause prices to rise. As a result, short-term traders could see gains ranging from 2.5% to almost 14% from the current price of around $3,600.
Short Squeeze Alert for XRP
On the other hand, XRP's 24-hour volume of short positions accounts for 52.56% of its open interest, totaling $344.60 million. With the token trading at $0.627, it is poised for increased volatility. XRP has liquidity pools in both directions, with particular focus on the $0.71 zone for potential short liquidations. However, technical indicators suggest a possible downtrend breakout, so traders must remain vigilant.
Despite the potential for short sellers' futures liquidations, it is important to note that a short squeeze is not guaranteed. The cryptocurrency market is highly volatile and subject to rapid changes at any moment. Investors should exercise caution and do their own research before making any investment decisions.
