Toncoin (TON) and Notcoin (NOT) Display Interesting Dynamics That Could Favor a Short Squeeze

After an impactful cryptocurrency market crash last week, a bearish sentiment looms over most cryptocurrencies, creating speculative imbalances and liquidity.

After a cryptocurrency market crash last week, most digital assets are trading in the red, sparking fears of an extended bear market. However to Finbold analysis, two cryptocurrencies are displaying a dynamic that could lead to a short squeeze.

Specifically, short-sellers are dominating two cryptocurrencies, creating an interesting scenario. For context, a short squeeze occurs when there is an abrupt surge in the price of an asset, triggered by a pessimistic market outlook.

As a result, short-sellers are forced to close their positions at a loss, further driving up the asset’s price.

To identify any potential candidates for a short squeeze, Finbold retrieved data from CoinGlass on July 7. We analyzed the funding rate of the most traded cryptocurrencies in the derivatives market, ranking them by the highest open interest (OI).

Usually, a negative funding rate is an indication of more open interest in short positions than longs. Consequently, the crypto exchange algorithm makes short-sellers pay an annual percentage rate (APR) to traders holding long positions, creating an incentive for balance.

On the other hand, positive funding rates also apply. This extra cost for holding a position affects the liquidation prices and favors long or short squeezes, respectively.

Toncoin (TON) negative funding rates

First, Toncoin (TON) is displaying a -26.65% funding rate on July 7, indicating a dominance of short positions. The native token of the Open Network has faced several criticisms related to the Telegram crypto wallet, which exerted bearish pressure.

Furthermore, TON experienced a massive surge in 2024, and the recent market crash caused a long-overdue correction to its price, which encouraged sell-offs and further drops. The network has positioned itself as one of the leading Solana (SOL) competitors, leveraging Telegram’s popularity to attract investors.

Despite the negative funding rate, TON’s derivatives volume dropped by 43% in the last 24 hours. As a result, the current $295.34 million open interest might not be enough to trigger a short squeeze. This is because the dropping volume suggests short-sellers are closing their now expensive positions with a 26.65% annual cost.

Notcoin (NOT) short squeeze alert

In contrast, Notcoin (NOT) has risen to the eleventh largest open interest in the market, with a 526% volume surge. The $1.64 billion capitalization token has a $219.59 million open interest for a 0.1338 OI/MCap ratio.

Considering a remarkable 57.53% negative funding rate, NOT is setting the stage for a short squeeze. NOT is a play-to-earn token integrated into the TON Blockchain and the Telegram wallet.

However, it’s crucial to note that such increased open interest and surging volume to open short positions are typically bearish. This market move suggests that investors and traders are betting on lower prices for TON and, especially, NOT.

If this sentiment is fueled by fundamental matters and negative news, a short squeeze may never materialize as price downtrends. These highly shorted coins need some bullish news and events to trigger a surge and, thus, a short squeeze.

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