The feeling of "intense fear" has returned to the market in the last week of January. This atmosphere has led to the opening of short positions dominating the market. However, several data points indicate that there are many altcoins that could trigger large liquidation events due to specific factors of each coin.
This week, altcoins like Ethereum (ETH), Chainlink (LINK), and River (RIVER) may collectively cause nearly 5 billion USD in liquidations. Here are the accompanying reasons.
1. Ethereum (ETH)
The 7-day liquidation map of Ethereum clearly shows an imbalance between the total value that could be liquidated from short positions versus long positions.
If ETH returns to touch 3,200 USD this week, short traders may face liquidation worth over 4.8 billion USD.
There are clear reasons for traders to be cautious. Analyst CW, using Ethereum Whale vs. Retail Delta data, indicates that in the past week, whales have regained control of ETH again, with the indicator shifting from negative to positive and continuing to surge rapidly.
Retail investors are being liquidated while whales are increasing their long positions. Those affected by the downturn are the retail investors. Whales will continue to instill fear until retail investors capitulate, analyst CW said.
A recent report from BeInCrypto also revealed that while ETH fell below 3,000 USD, several whales increased their accumulation of coins. This behavior could be a catalyst for price recovery and cause severe damage to short positions.
2. Chainlink (LINK)
Like ETH, LINK is currently experiencing an imbalance on its liquidation map in its market. The negative sentiment in the altcoin market in late January has pushed derivative traders to allocate capital and leverage more with short positions in LINK.
As a result, this group of traders will face massive losses if LINK recovers. If LINK rebounds to 13 USD this week, the total accumulated value of short positions that may be liquidated could exceed 40 million USD.
Meanwhile, data from CryptoQuant shows that the number of LINK on exchanges hit a new monthly low for January. The chart indicates that although prices have dropped, investors are still accumulating LINK and gradually withdrawing from the exchanges. This behavior reflects long-term confidence in this asset.
Additionally, data from the on-chain analysis platform Santiment indicates that LINK is considered one of the undervalued altcoins after the recent market correction.
If the pressure to accumulate increases amid falling prices, a surprising rebound may occur, which would further increase the liquidation risk for short sellers of LINK this week.
3. River (RIVER)
River is a decentralized finance (DeFi) protocol that creates a chain-abstraction stablecoin system, allowing users to collateralize assets on one blockchain and access liquidity on another without using bridges or wrapped assets.
The market value of RIVER moved against the overall market and reached a new peak above 1.6 billion USD, while a month ago, the market value was still below 100 million USD.
This rapid surge has pushed many traders into FOMO behavior, resulting in primarily holding long positions, which may lead to a high liquidation value for the long side.
If RIVER reverses unexpectedly and drops below 60 USD this week, long positions may face liquidation of up to 35 million USD.
Is this scenario possible? On-chain data has shown several warning signs, with data from Etherscan indicating that the top 5 wallets of River hold more than 96.6% of the total supply, showing extreme centralization.
It is controlled by an insider group. This tweet indicates that it is currently under price control, starting from MYX, COAI, AIA, and almost ending at zero. Please be cautious, Honey, the investor said.
While some investors still believe that RIVER will rise to 100 USD soon, others are beginning to show uncertainty and concern about the price retracement. If a reversal occurs, it could significantly pose a risk of liquidating long positions in RIVER.
These altcoins reflect the differences in market dynamics among altcoins in late January. Most analysts agree that the altcoin market is gradually selecting more coins, so only assets that attract institutional interest will continue to receive funding and grow in the long term.
