Definition ∞ Short squeeze potential refers to the likelihood that a digital asset’s price will rapidly increase, forcing traders with short positions to buy back the asset. This market condition arises when a significant number of traders have bet against an asset’s price, and a sudden upward movement causes them to close their positions to limit losses. The collective buying pressure from these forced closures can further accelerate the price rise, creating a self-reinforcing upward trend. It is a highly volatile event often observed in markets with substantial short interest.
Context ∞ Short squeeze potential is a frequent topic of discussion among cryptocurrency traders, who actively seek assets with high short interest as potential opportunities. Analysts monitor metrics like funding rates and open interest to identify assets susceptible to such rapid price accelerations. News reports often highlight instances where a short squeeze has dramatically altered an asset’s market trajectory.
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