Definition ∞ Long squeezes occur in financial markets when the price of an asset begins to decline rapidly, forcing traders who hold long positions to sell their holdings to cover potential losses. This selling pressure further accelerates the price drop, creating a cascading effect where more long positions are liquidated. Traders who bought an asset expecting its price to rise are compelled to exit their positions, often at a loss. This market dynamic typically results in sharp, sudden downward price movements.
Context ∞ In the volatile cryptocurrency market, long squeezes are a frequent occurrence, often amplified by the high leverage available on many trading platforms. News reports commonly highlight these events, especially during periods of significant market downturns, affecting a large number of leveraged positions. Understanding long squeezes is crucial for comprehending sudden price drops and the rapid liquidation cascades that can impact digital asset valuations.
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