Short Squeeze Sparks New-Year Shakeout as XRP, Memecoins, and Altcoins Steal Momentum

The crypto market opened the new year with a sharp derivatives-driven shakeout, catching many traders on the wrong side of the move and forcing a rapid reset in positioning. Over the past 24 hours, more than $400 million in crypto futures positions were liquidated — the majority of them short bets, signaling that many traders entered January expecting prices to slide rather than surge.

Instead, the market moved higher, triggering a wave of forced buybacks that helped fuel fresh upside across select tokens.

Despite the liquidation cascade, Bitcoin’s global futures open interest remained steady at around 660,000 BTC, suggesting that leverage in BTC markets is being recycled rather than aggressively expanded.

XRP, however, told a different story. Open interest in XRP futures surged to 2 billion XRP, its highest level since October, reflecting rising capital inflows as the token pushed to multi-week highs. The jump points to renewed speculative interest and growing conviction among traders positioning for continued volatility.

Funding rates across most major cryptocurrencies remain moderately positive, reinforcing a generally bullish bias. That said, a handful of tokens — including Solana (SOL), TRON (TRX), Zcash (ZEC), Shiba Inu (SHIB), and Uniswap (UNI) — are flashing negative funding rates, signaling that bearish short positions are quietly building beneath the surface.

Despite the heavy liquidations, volatility remains muted. Volmex’s BVIV index, which tracks 30-day implied volatility for Bitcoin, reversed a brief spike and settled back into the mid-40% range, suggesting traders are not pricing in major near-term turbulence.

Options markets echo that calm. On Deribit, the put-call imbalance in both Bitcoin and Ethereum continued to ease as traders rotated toward call options, chasing upside exposure rather than hedging downside risk. Flow data showed strong demand for BTC and ETH call spreads, alongside BTC strangles, reflecting expectations of directional movement without panic-level fear.

After a brutal year that wiped out more than 95% of value across many meme tokens, the sector is showing early signs of revival.

Daily trading volume on Pump.fun, the Solana-based meme-token generator, surged to a record $1.27 billion, underscoring renewed retail enthusiasm. At the same time, activity on BNB Chain has accelerated, driven by interest in predominantly Chinese-language tokens grouped under the so-called “Four Meme” category — a term popularised by Binance founder Changpeng Zhao.

While speculative, the resurgence highlights a familiar crypto pattern: when risk appetite returns, memes are often among the first to benefit.

Beyond memes, Sui (SUI) emerged as a notable outperformer. The token climbed 3% since midnight and is up 16% over the past 24 hours, following the release of a research paper by Mysten Labs exploring private crypto transactions.

The publication has sparked speculation that Sui could introduce privacy-focused features in future upgrades, injecting fresh narrative-driven momentum into the token.

CoinMarketCap’s Altcoin Season Index has risen to 27 out of 100, still firmly in “Bitcoin season” territory but a meaningful rebound from December’s low of 14. The move suggests early signs of broader strength across the altcoin market.

However, caution flags are emerging. The average crypto RSI is now flashing overbought conditions, indicating that some altcoins may be vulnerable to short-term pullbacks as traders lock in profits after the recent bounce.

The start of 2026 is shaping up as a battle between renewed optimism and lingering caution. Short liquidations, rising XRP leverage, and revived memecoin activity point to growing risk appetite — yet muted volatility and overbought signals suggest traders remain selective.

For now, momentum favors the bulls. But if history is any guide, the market may soon demand proof that this rally can sustain itself beyond the initial New-Year squeeze.