The alternative cryptocurrency market entered the third week of August in the red. The market cap (TOTAL3) declined by 7%, from over $1.1 trillion to $1.03 trillion. This correction triggered a short-selling sentiment among derivatives traders.
How much of a liquidation risk does this represent? The liquidation heat map highlights several alternative cryptocurrencies facing high exposure.
1. Solana (SOL)
The 7-day Solana liquidation map shows that short liquidation volume (green on the right) dominates long positions starting from the third week of August. However, short positions may face risks as Solana benefits from several bullish developments.
Specifically, Solana is reviewing a new governance proposal, SIMD-0326, which introduces the Alpenglow consensus protocol to accelerate block finalization.
Additionally, Solana announced a new record. The network processed over 104,000 transactions per second.
If SOL recovers above $200 this week, over $1.1 billion in short positions could be liquidated. On the other hand, if SOL drops to $161, about $646 million in long positions face liquidation.
Analysts warned of a more concerning scenario. They expect SOL to drop below $170 before rising again above $200 in the same week. This means that both long and short traders may face liquidation risks.
2. Dogecoin (DOGE)
Eyes are on Dogecoin (DOGE) in August as whales and investors are accumulating it heavily.
Additionally, Grayscale submitted a request to the U.S. Securities and Exchange Commission to convert a $2.5 million Bitcoin fund into a spot trading fund. At the same time, digital currency bettors on Polymarket are now assigning more than a 70% chance of approval for a DOGE trading fund by the end of the year.
Despite this positive news, the DOGE liquidation map shows that short positions dominate the accumulated liquidation volume. Traders seem to be anticipating a correction. DOGE has already risen over 30% this month, climbing from $0.188 to $0.255.
If DOGE drops below $0.20 this week, accumulated long liquidation could exceed $176 million. Conversely, if DOGE rises again to $0.26, about $290 million in short positions will be liquidated.
Trader Tardigrade argued that the time is not right to be pessimistic about DOGE. He predicted that the coin might be close to a strong rally.
Trader Tardigrade predicted that "Dogecoin's ascending triangle sets its average target at $1.80". Prediction.
3. Chainlink (LINK)
Chainlink (LINK) is gaining interest in August. Investors are excited about the Chainlink Reserve initiative announced earlier this month.
A recent report from BeInCrypto indicated that whale wallets added over 1.1 million LINK in the past seven days.
However, the same report also revealed that Chainlink's reserves on exchanges are rising again. This indicates that investors are starting to take profits after LINK surged over 50% since the beginning of the month.
The LINK liquidation map looks relatively balanced as both bulls and bears have strong incentives.
If LINK drops below $22, approximately $85 million in long positions could be liquidated. If LINK rises to $27, about $85 million in short positions will face liquidation. The price range is the same, and the liquidation volume is almost identical.
At the same time, market sentiment remains greedy at the time of writing, while the alternative currency season index stands at 51 points.