The first week of January 2026 has seen a return of positive sentiment to the cryptocurrency market, pushing altcoins toward a recovery. However, this rebound is clouded by significant risks, as derivatives data for several major altcoins approach danger zones that have historically triggered large-scale liquidations.
Ethereum (ETH) is supported by several bullish factors, including a surge in new holders, a staking entry queue surpassing the exit queue, and on-chain transactions reaching a decade high. This has led traders to increase capital and leverage on long positions, pushing potential long liquidations far above shorts. A critical warning sign is that ETH's estimated leverage ratio has reached an all-time high, indicating widespread high-risk derivatives trading. Analysts warn that a drop to the $2,800 zone this week could trigger over $5.8 billion in long liquidations.
Bitcoin Cash (BCH) is approaching a key resistance level of $650, with derivatives traders allocating more leveraged capital to long positions. However, BCH open interest has reached a record high of $980 million. Historically, when BCH open interest rose above $600 million, a sharp and prolonged price correction followed. If BCH falls to the $570 level, cumulative long liquidations could exceed $80 million.
Pepe (PEPE), a leading memecoin, has surged more than 70% since the start of the year, reviving hopes for a new meme coin season. However, its liquidation map shows that a price drop to $0.00000613 (a ~10% decline) could trigger over $15 million in long liquidations. Analysts warn of a potential Elliott Wave correction, suggesting PEPE may have completed its third upward wave, increasing the risk of a pullback as early buyers take profits.
The broader market context shows Bitcoin climbing to a four-week high of $93,350, with $260 million in leveraged futures liquidated in the past 24 hours—mostly short positions. However, altcoin performance is fractured, with meme coin and metaverse indexes declining. The average crypto Relative Strength Index (RSI) flashing 58/100 suggests the market is entering overbought territory, indicating a short-term drop is likely as traders lock in gains. The crypto market faces continued volatility, and without learning from the over $150 billion in liquidations in 2025, similar losses could repeat in 2026.
