Uniswap (UNI) and Aave (AAVE) Face Potential Short Squeeze Amidst Market Corrections
At the beginning of this week, Bitcoin (BTC) and the majority of leading cryptocurrencies experienced a price correction. Due to the short-lived shift from bullish to bearish sentiments, the number of short positions in the cryptocurrency market increased.
Data on the ratio of long and short positions indicate that two cryptocurrencies may be on the verge of an inevitable short squeeze, leading to price increases amid changing market dynamics.
Particularly, Uniswap (UNI) and Aave (AAVE) have shown a rise in open short positions over the last 12 and 24 hours. Both projects are among the most popular decentralized finance (DeFi) protocols with support across multiple networks.
Short Squeeze Alert for Uniswap (UNI): Uniswap has the highest short sales volume and weight of short positions compared to open long positions. Over the past 12 hours, UNI registered short positions totaling $39.14 million compared to long positions of $32.83 million, equating to 54.39%.
Source: CoinGlass Longs vs. shorts ratio for UNI over 12 and 24 hours. Source: CoinGlass
Over the 24-hour period, short positions amount to $113.58 million (52.77%), nearly equal to the daily trading volume of $141.21 million.
uniswap-vol-mcap Uniswap market capitalization and volume (24 hours). Source: CoinMarketCap
Thus, changes in sentiment regarding Uniswap could trigger a massive short squeeze for UNI, considering the token’s current liquidity.
Will Aave (AAVE) Face a Short Squeeze? The Aave protocol has also become a target for cryptocurrency short-sellers. Its token AAVE has short positions totaling $28.21 million and $75.03 million opened in the last 12 and 24 hours, respectively. Interestingly, this signifies dominance over long positions at 54.29% and 53.10%, respectively.
Source: CoinGlass Longs vs. shorts ratio for AAVE over 12 and 24 hours. Source: CoinGlass
Despite the higher weight of the longs vs. shorts ratio, the potential short squeeze for AAVE is likely to have a lesser impact on price compared to UNI. This is due to the higher 24-hour exchange volume of $122.16 million compared to daily short positions.
Market capitalization and volume for Aave protocol (24 hours). Source: CoinMarketCap
At the time of publication, Uniswap and Aave were trading at $6.2 and $91.76, respectively.
Many cryptocurrency traders eagerly anticipate an altcoin season that both digital assets may initiate after the short squeeze, a phenomenon occurring when bearish positions are liquidated due to a sudden increase in demand and prices. The increased demand leads to a large volume of buy orders, driving up prices and triggering liquidation contracts for derivative financial instruments, further pushing the price higher.
