After three consecutive weeks of sharp declines in the cryptocurrency market, renewed activity on the buying side is noteworthy. However, these recovery signals do not seem to have completely eliminated the cautious approach of investors. Particularly prominent data for Ethereum (ETH), Dogecoin (DOGE) and Zcash (ZEC) point to high liquidation risks this week.
Decreasing Supply and Increased Pressure on Short Positions in Ethereum
Ethereum is one of the leading smart contract platforms in the blockchain industry and has significant weight in the crypto market with its wide ecosystem. According to the latest data, in the last seven-day liquidation map, the amount of possible liquidation resulting from short positions on the ETH side stands out as more than long positions. The price of ETH has fallen by approximately 40 percent since mid-January.
However, the ETH balance on cryptocurrency exchanges has fallen to its lowest level in 2024, approximately 16 million ETH. The latest wave of sales led to a significant outflow from the stock markets, further limiting the supply in the market. Additionally, over 4 million ETH is currently held in the staking queue; This further reduces the available supply in the market. If market conditions continue like this and the ETH price reaches $ 2,370 this week, it is predicted that there will be a total liquidation risk of $ 3 billion for short position investors.
Technical Signals and Investor Expectations in Dogecoin
Dogecoin is known as a cryptocurrency that was initially developed as an internet joke and gained a widespread community over time. Recently, the DOGE price fell below $0.10, which is the lowest level of 2024. Analysis shows that if prices rise again, there may be a potential liquidation risk of up to $98 million in short positions.
In the technical evaluation made by Trader Tardigrade, it was stated that the bull flag formation was followed on the short-term chart and DOGE could approach the $ 0.12 level this week.
In the long-term outlook, another analyst points out that the market structure can be considered strong, drawing attention to the overlapping high bottom and top formations.
Javon Marks evaluates that “If Dogecoin continues its strong trend, the price may rise well above the current peak level.”
Additionally, in a social media interaction for leading entrepreneurs at the beginning of February, popular entrepreneur Elon Musk’s response to Dogecoin created a new potential for activity in the community.
Developer Crisis and Positive Signals in Zcash
Zcash is known as a cryptocurrency that offers privacy-oriented transactions and stands out with its privacy technology in the blockchain ecosystem. It seems that the announcement that the Electric Coin Company team, the main developer of the project, will be leaving en masse, was effective in the price loss, which reached 50 percent as of January 8. Negative market sentiment also supported this decline.
However, in the last week, the donation made by Vitalik Buterin, one of the important names of the crypto ecosystem, to a development group working for Zcash and the emphasis on privacy technologies is considered positive. According to independent platform data, over 5 million ZEC continues to be held in the protected pool on the Zcash network. Developments reveal that investor confidence continues to some extent.
In general, there is a gradual recovery trend after the recent sharp sales in the altcoin market. Analysis indicates that the market value may rise above $2.8 trillion again.
It is considered that this recovery process and some asset-specific developments may cause increased pressure on short position investors and trigger large liquidation waves.
