- Altcoin prices hit key lows, forming a demand zone as sellers lose momentum.
- Low trading volume and thin supply create conditions for rapid upward price movements.
- Short squeezes and momentum-driven buying can fuel powerful altcoin price rallies.
Altcoins have created a higher low pattern, suggesting sellers are losing steam in pushing prices anymore lower. With major lows being set, altcoins are settling into a low-volume, range-bound state. This shift might just be the beginning of a steady upward trend for the altcoin segment.
The market cap of altcoins (excluding Ethereum) has climbed above $600 billion. This bullish move followed a correction, which hints at more upward movement to come. If this level holds, altcoins could be headed for a significant upswing that could last for several weeks.
Low Volume and Negative Sentiment
The market, for the moment, feels bearish. Many traders are losing money as prices linger at low levels. Trading volumes have dried up, and small candles have ruled the charts for weeks. This pattern signals a lack of market activity and investor interest. Yet, order books are shrinking on the supply side, hinting at limited selling pressure.
With fewer sellers in the market, any sudden buying pressure could trigger significant upward movements. The combination of low volume and thin supply means even a small amount of buying could cause a major price jump.
Read also: Altcoin Season Dawning? Analyst Sees Bullish Shift
Breakouts and Short Squeezes
In such a scenario, altcoins are primed for sharp rallies. As prices break out from their lows, traders often experience fear of missing out (FOMO) and they rush to buy. These initial breakouts can lead to shallow retracements as demand pushes prices higher.
Read also: Whale Activity Surges Post-Fed Rate Cut: Bitcoin, Stablecoins, Altcoins Surge
Bearish sentiment persists among traders who were overly optimistic during the decline. These traders tend to short the first signs of recovery, expecting further drops. But, due to the thin supply, these shorts are vulnerable to liquidation.
When short positions get liquidated, the price can rise further as momentum-driven buying intensifies. This combination of short squeezes and increased demand can quickly push prices upward, reversing months of gradual selling. Traders need to be cautious, however, as the thin demand side can lead to sharp corrections once the rally slows.
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