Why will XRP, SOL and XAUT spark major liquidity this week?
Escalating geopolitical tensions over the weekend did not result in significant capital outflows from altcoins. This test suggests that altcoin prices are hovering around equilibrium levels and are preparing for a big move. As a result, the market has the potential to create a large amount of liquidity.
Altcoins like SOL, XRP and XAUT each have unique drivers that create volatility and liquidity in long and short positions.
1. Solana (SOL)
SOL has been trading sideways around $84 since early February. Maintaining a narrow range around a fixed price usually reflects a level of “volatility compression” before a breakout.
As a result, SOL derivatives traders may face liquidation soon, regardless of whether they hold long or short positions. Analyst João Wedson's observation of the Solana Buy/Sell Delta Index reinforces this possibility.
Solana's Buy/Sell Pressure Delta indicator has turned red and has declined significantly. Historically, this signal does not indicate further decline, he explained. However, it could signal a major bottom before a reversal.
As we saw in 2022, this has historically indicated two possible scenarios: a local bottom followed by a strong upward movement or the start of a strong bear market.
A 7-day liquidity map from Coinglass shows that if SOL falls to $74 this week, the cumulative potential liquidity for long positions could reach $376 million.
Conversely, if SOL returns to $95, the cumulative potential liquidity for short positions could reach $450 million.
2. XRP
XRP is experiencing a short-term balance between buying and selling. At the end of the week, negative news about escalating tensions involving the United States, Israel and Iran did not generate sales. Instead, XRP stalled around $1.35.
According to BeInCrypto's latest report, the Net Unrealized Profit and Loss (NUPL) indicator shows the final level of decline. Over the past 12 years, March has averaged an 18% return for XRP, making it the strongest month since the first quarter.
However, last week, 472 million XRP, worth $652 million, was transferred to Binance. Binance stocks have shown signs of returning to growth after months of decline.
These opposing forces increase the likelihood that XRP traders will face liquidity regardless of whether they hold long or short positions.
The 7-day liquidity map shows that if XRP drops to $1.20 this week, the cumulative potential liquidity for long positions could exceed $125 million. Conversely, if the price rises to $1.50, the cumulative potential liquidity for short positions could exceed $157 million.
3. Tether Gold (XAUT)
As the price of physical gold continues to rise, tokenized gold has attracted the attention of traders.
Tether Gold (XAUT) is a digital token backed by physical gold and issued by Tether. According to data from Coinglass, XAUT's total open interest recently exceeded $800 million.
The price of XAUT is mainly based on the price of physical gold. However, as more investors gain exposure to XAUT and leverage levels increase, the risks of liquidating long and short positions may increase.
The liquidity map shows that if XAUT breaks above $5,600 and sets a new high on Bybit alone, short traders could face losses of over $61 million. Conversely, if the price were to drop to $5,000, long traders could face a loss of more than $90 million.
If Binance data is included, the filtering losses could be even larger. A report from CryptoQuant has revealed that XAUT has officially entered the top 10 of Binance's perpetual contract trading pairs.
Overall, total market open interest has fallen from over $120 billion at the start of the year to $94 billion at the moment. Short-term derivatives traders have reduced leverage.
They are primarily focused on large-cap altcoins and have proven real-world assets like gold and silver. Market participants appear to be more cautious and are waiting for clear signals before deciding on the next trend.
