Binance positions may generate short squeeze for MANA, GRT, AAVE

When older altcoins like MANA, GRT, or AAVE make a resurgence, expectations are their rallies may be short-lived. Several of these older assets have built up short positions on Binance, which may end up triggering squeeze rallies in the coming days.

Short squeezes may be possible for altcoins trying to break out with a rally. Since most of the smaller cap assets are still reeling from the 2022 bear market, short positions betting on their continued slide have grown in number. However, several assets have built up enough positions on Binance and are potentially positioned for a short squeeze.

The reason for the prevalence of short positions is that altcoins are still seen as overvalued. There are also no indications of an altcoin bull market based on the performance of the top 100 assets. Yet it does not stop traders from trying to spot short-term opportunities for gains, including a short squeeze.

Some of the underperformance of altcoins may be due to overly cautious trading. The Altcoin Season index increased from 26 to 33 points in a day, after some signs of positive performance.

Smaller cap altcoins are also showing signs of rebounding with little resistance, creating strong daily rallies. Recent growth tokens include FET, SUI, OP, and TON, growing by up to 20% in a single day.

Santiment noted increased short position liquidity, which may be attacked in a single trading wave. The altcoins that accrued short interest on Binance include Decentraland (MANA), The Graph (GRT), and Aave (AAVE).

MANA may rally on news of Decentraland 2.0

In the case of MANA, the short squeeze may simply reawaken a former Web3 and metaverse star, forgotten after the bear market. MANA has an open interest of $8.3M on Binance and a total of $17.52M on other exchanges.

MANA has been on an extended slide for the past months after peaking around $0.67 in March 2024. Currently, the asset is at $0.27, reversing its direction from a recent low of $0.24. The main Decentraland apps hosts fewer than 300 daily active users, while the metaverse land plots have also lost their value. The Decentraland NFT collection of metaverse plots now has a floor price of only 0.12 ETH, down from a peak of 1.69 ETH.

In addition to the possibility of a short squeeze, the Decentraland team has not abandoned the project, despite the outflow of Web3 hype. Decentraland 2.0 is in the making, with alpha testing already open. News around the relaunch may trigger MANA just enough to liquidate the short positions.

The Graph brings in query fees from L2

The Graph is also not a fully frozen project despite trading being far from its 2021 peak. GRT is currently near its lows at $0.14 and trading volumes of $34M in 24 hours.

GRT, however, is not disproportionately shorted. Traders may end up also attacking long leveraged positions. GRT has more than $14M in total open interest, with $6.3M on Binance.

The Graph specializes in supplying Web3 data for high-speed app usage. Similar to Chainlink (LINK), this project may benefit from a return to DeFi and other high-traffic activities. The Graph data reaches 50 chains and over 6,000 subgraph projects. The Graph generates up to $80K in fees on highly active days, though there are also periods with extremely low demand.

AAVE expects growth, but with shorting in case of a correction

AAVE is one of the big movers, rising from bear market lows of around $50. The AAVE protocol moved above $150 after drawing in smart money in August. AAVE has also drawn in more than $11.3B in value locked, while the tokens market cap remains disproportionate at $2.2B. The Aave project also doubled its loans from $3.5B at the start of 2024 up to $7B, which is not immediately reflected in the token price.

AAVE carries $89.5M in open interest on Binance, with a total of more than $163M including other top exchanges. Short and long open interest is nearly equalized, but shorts may be attacked first.

The recent AAVE rally is not even considered a breakout, it is a continuation of the gradual accumulation phase. Some of the short positions may close if AAVE crosses $160 again. So far, AAVE has successfully crossed the $135 resistance level.

The short positions are betting on the very brief altcoin rallies in 2024. Aave, however, has fundamental factors boosting its positions and may wipe out some of the short positions, achieving a squeeze.