The 'Extreme Fear' sentiment has returned to the markets in the last week of January. This has led to short positions dominating. However, several data points suggest that multiple altcoins may trigger widespread liquidations for their own specific reasons.
This week, altcoins like Ethereum (ETH), Chainlink (LINK), and River (RIVER) could together trigger nearly $5 billion in liquidations. Here are the reasons why.
1. Ethereum (ETH)
Ethereum's 7-day liquidation map shows serious imbalance between potential total liquidations of short positions and long positions.
If ETH returns to $3,200 this week, short sellers may face liquidation losses of over $4.8 billion.
Traders should be cautious. Analyst CW states that based on Ethereum Whale vs. Retail Delta data, whales have taken control of ETH last week. The metric has shifted from negative to positive and continues to rise sharply.
‘Retail investors are being liquidated while whales increase their long positions. Retail investors suffer from this drop. Whales continue to stoke fear until these give up,’ analyst CW said.
A recent BeInCrypto report also shows that even though ETH dropped below $3,000, many whales increased their accumulation. This activity could accelerate a rebound and cause severe losses for short positions.
2. Chainlink (LINK)
Like ETH, LINK also experiences imbalance on the liquidation map. The negative sentiment in the altcoin market at the end of January has led derivative traders to direct more capital and leverage into LINK's short positions.
As a result, these traders would suffer greater losses if LINK were to recover. If LINK returns to $13 this week, total liquidation of short positions could rise to over $40 million.
Transfer data shows that LINK's reserves have dropped to a new monthly low in January according to CryptoQuant. The pattern shows that despite the price drop, investors continue to accumulate LINK and transfer it away from exchanges. This behavior indicates long-term confidence in the asset.
Additionally, on-chain analytics service Santiment's data identifies LINK as one of the undervalued altcoins following the recent market downturn.
If accumulation pressure intensifies as the price drops, an unexpected rebound may occur. Such a move would increase the liquidation risk of LINK's short positions this week.
3. River (RIVER)
River is a decentralized finance (DeFi) protocol that creates a chain-abstraction stablecoin system. It allows the use of collateral on one blockchain and obtaining liquidity on another without bridges or wrapped assets.
RIVER's market cap has risen to a new high of over $1.6 billion, contrary to the general market movement. Just a month ago, the market cap was below $100 million.
The strong rise has caused many traders to fall prey to FOMO behavior. As a result, long positions now dominate, and there is significant liquidation risk on the long side.
If RIVER drops below $60.00 this week, liquidation losses for long positions may rise to as much as $35 million.
Is this scenario possible? Blockchain data provides several warning signs. According to Etherscan, the five largest River wallets control over 96.6% of the total supply, indicating very strong concentration.
‘Insiders dominate this, that’s it. Keep manipulating. It started with MYX, COAI, AIA and ended up nearly zero. Be careful,’ investor Honey stated.
Some investors are still confident that RIVER will soon rise to the $100.00 level. Others, however, have begun to doubt and fear that the price may turn downward. Such a reversal could trigger significant liquidation risk for long positions.
These altcoins illustrate the different dynamics of the altcoin market at the end of January. Analysts widely agree that the altcoin markets are becoming more selective. Only those assets that attract institutional interest are likely to retain investments and long-term growth.