Short positions on Binance may trigger a short squeeze for older altcoins like MANA, GRT, and AAVE. These assets, often considered past their prime, are showing signs of resurgence that could be short-lived. As traders accumulate short positions, the possibility of a squeeze rally becomes more likely.
Potential short squeezes in the Altcoin market
The recent uptick in short positions across several altcoins suggests a growing expectation that these assets will continue to decline. However, some traders are betting on short-term opportunities to capitalize on possible short squeezes. This scenario is particularly relevant for smaller-cap assets recovering from the 2022 bear market. Short positions have increased despite the lack of a clear altcoin bull market, leading to potential squeeze opportunities.
Some market participants still consider altcoins overvalued, but they are underperforming, contributing to the cautious trading behavior observed. The Altcoin Season Index recently increased from 26 to 33 points, reflecting positive market activity. However, these altcoins, including MANA, GRT, and AAVE, may experience short squeezes as short positions build up on Binance.
MANA’s resurgence is tied to decentral and 2.0
MANA, the token behind Decentraland, has declined over the past few months. However, there is potential for a short squeeze to reawaken this former Web3 and metaverse star. Currently trading at $0.27, MANA has seen a reversal from its recent low of $0.24.
The Decentraland project, despite a decrease in daily active users and metaverse land plot values, still needs to be abandoned. The development of Decentraland 2.0, currently in alpha testing, could provide the catalyst to trigger a squeeze, potentially liquidating short positions. MANA’s open interest on Binance is $8.3 million, totaling $17.52 million across other exchanges.
The Graph (GRT) is another altcoin with the potential for a short squeeze. GRT, currently trading at $0.14, has not reached its 2021 peak but remains an active project. The Graph specializes in supplying Web3 data for high-speed app usage and is used by over 6,000 subgraph projects across 50 chains. While GRT is not disproportionately shorted, it has built up $6.3 million in open interest on Binance, totaling $14 million across exchanges. This scenario makes GRT a candidate for short- and long-leveraged position attacks, depending on market dynamics.
AAVE’s growth and short-interest dynamics
AAVE has seen significant growth, rising from its bear market lows to over $150, supported by increased value locked in its protocol. Despite this growth, AAVE has also attracted significant short interest, with $89.5 million in open interest on Binance and more than $163 million across other exchanges. The recent rally in AAVE has yet to break out of its accumulation phase. Still, a continued rise could trigger the closure of short positions, especially if AAVE crosses the $160 mark again. AAVE’s solid fundamentals, including doubling its loans to $7 billion, may further support a potential short squeeze.
Despite being seen as overvalued, these older altcoins may experience short squeezes as traders seek to capitalize on short-term market opportunities. Substantial short positions on Binance indicate that these assets could see sudden and significant price movements, driven by factors such as Decentraland 2.0, Web3 data demand, and AAVE’s continued growth.