After the Federal Reserve’s interest rate announcement in March, the cryptocurrency market saw a downturn, leading to an increase in investors betting against the market. This behavior, fueled by the phenomenon of fear of missing out (FOMO), resulted in heightened short-selling activity. Such market movements suggest that these short positions could compel investors to repurchase cryptocurrencies, possibly sparking a rise in prices and setting the stage for an upward trend. Notably, cryptocurrencies XRP and Avalanche have shown significant fluctuations in their monthly price and positioning data.
Chris Larsen’s Hack Impact on XRP Market Dynamics
The hacking of Ripple Co-Founder Chris Larsen’s personal accounts, which led to a substantial financial loss of 112 million dollars, caused XRP prices to decrease by 7%. This event led to increased short positions in XRP, intensifying the decline. However, the resulting significant liquidity pool might offer a chance for a short squeeze, where investors betting against the market might be pressured to buy back in, potentially raising prices.
XRP’s critical short liquidation level is pegged at 0.6 dollars. Should the price approach this threshold, those who have invested or are considering investment at the 0.5 dollar level could see a 20% profit on their XRP holdings.
Avalanche’s Potential for Profit Amidst Market Movements
Similarly, Avalanche (AVAX), the native token of the Layer-1 blockchain, exhibits signs of a nearing short squeeze. AVAX has substantial liquidity pools at four key price levels. As prices currently stand, a surge reaching the top of these pools could result in a 16.8% gain from its present price of 36 dollars.
The data indicates that an increase in Bitcoin’s value might be necessary for these altcoins’ short squeeze scenarios to play out, suggesting that liquidity at higher price points is not the sole factor for a market rebound.