What happened
The rally appears to be on, once again, in the cryptocurrency world. Top-25 tokens Dogecoin (DOGE -0.76%), Avalanche (AVAX -2.48%) and Algorand (ALGO -0.87%) had surged 11.5%, 12.2%, and 10%, respectively, over the past 24 hours at 11:10 a.m. ET.
These moves appear to be mainly the result of forced liquidations among short-sellers betting on declining crypto prices. Rising spot prices have accelerated short liquidations, acting much in the same way as a short squeeze would for stocks.
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According to website Coinglass, which tracks liquidations, short liquidations in the crypto world totaled $124.9 million over the past 24 hours, more than three times long liquidations, which stood at $40 million over the past 24 hours. Dogecoin, Avalanche, and Algorand each saw short liquidations outpace long liquidations, by quite a wide margin.
So what
The crypto market is moving full-steam ahead, with positive momentum driving most tokens higher today. That said, among altcoins, these three tokens' double-digit percentage increases today put these tokens near the top of the leaderboard in terms of today's gainers.
Dogecoin has actually underperformed meme token Shiba Inu, which surged more than 40% in early trading today. Again, forced liquidations were the key driver for this token today, as short-sellers get hurt taking the bearish end of the meme trade right now.
It's perhaps unsurprising to see smaller-cap tokens with such as Avalanche and Algorand follow suit, given the amount of upside long-term investors see with these proof-of-stake networks. Forced liquidations only amplify the bullish thesis behind these tokens, adding fuel to a fire that appears to be raging once again.
Now what
The big question many investors have with these tokens is whether this momentum can continue for any extended period of time. At some point, short liquidations are likely to slow, as traders remove their speculative downside bets.
Indeed, whether the longer-term bearish trade will turn into bullish bets for a significant period of time remains to be seen. To be sure, these three cryptocurrencies have seen impressive runs over the past few days. With volatility likely to remain high, these altcoins once again present exhilarating options for investors looking to add some risk to their portfolios.
Right now, optimism is breeding very bullish sentiment, providing for what could be the start of another big rally. Of course, investors looking to buy the uptrend should be aware of the previous declines these tokens have seen. With great upside comes great risk, as evidenced by the moves these tokens have made in recent months.
