In cryptocurrency markets, a short squeeze is often described as a market manipulation event 👀 Why so? Here’s what you need to know about this relatively common financial phenomenon. 👇
the market moves sharply in the bullish direction, forcing a large number of short sellers to close their positions while further increasing buying pressure.
It should be noted that the same mechanics can also be applied in reverse to cause a ‘long squeeze’. In this case, a large downward price movement liquidates leveragedand triggers a stop-loss cascade — resulting in further sell pressure. As longs are forced out of their positions and traders manually exit to avoid further losses, this can result in a runaway crash that is completely uncorrelated with the prevailing market sentiment.
For those who already own the asset that is being pumped by the squeeze, this can represent an excellent time to exit the position at a higher than expected value — particularly if the asset was on the decline for a long time.
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