The cryptocurrency market has experienced a reversal in its downward trend in the final days of the week, thanks to the release of non-farm employment data on May 3. After a period of prevailing short-selling, some cryptocurrencies are now exhibiting potential for rapid price increases due to short selling.
Current State of the Crypto Market
The total crypto market value index has seen a price increase of over $277 billion since the local bottom on May 1. In just three days, the index has risen by over 13%, reaching a peak of $2.318 trillion on May 4.
However, previous fear, uncertainty, and doubt (FUD) have largely driven investors in cryptocurrency transactions to short Bitcoin (BTC) and other cryptocurrencies. As a result, the likelihood of short selling events on the BTC side is increasing, which could drive prices higher.
On the other hand, two cryptocurrencies have experienced notable liquidations due to negative funding rates and accumulated short positions.
BNB Chain (BNB) Outlook
The current funding rate of BNB Chain (BNB), the native token of the Binance exchange, is attracting attention as the first indicator of a potential short squeeze. The 30-day funding rate heat map from CoinGlass as of May 4 supports this observation.
Those who are short selling on the BNB side are paying a 32.63% APR to investors with long positions, which could lead to the end of these short positions. Data shows that BNB has the sixth largest open interest in the derivatives market.
Looking at price targets, liquidity pools for short positions for BNB are observed between $600 and $630. Currently, BNB is trading at $588.
Will Bitcoin Cash (BCH) Rise?
Bitcoin Cash (BCH) has a higher negative funding rate of 35.96% and ranks among the top 10 cryptocurrencies in terms of open interest.
The liquidity pools of BCH, although not as intense as those on the BNB side, indicate regions between $500 and over $700. This suggests that a short squeeze on the Bitcoin Cash side could result in gains of over 40%.
Disclaimer: The information provided in this article should not be considered as investment advice. Investors should be aware of the high volatility and risk associated with cryptocurrencies and should conduct their own research.
