Definition ∞ A Short Squeeze occurs when a rapid increase in an asset’s price forces investors who had bet on its decline (short sellers) to buy the asset to cover their positions. This forced buying further escalates the price, creating a feedback loop. It is a situation where the anticipation of a price drop is invalidated by a swift upward price movement, leading to significant losses for short sellers.
Context ∞ The phenomenon of a Short Squeeze is frequently observed and discussed in volatile markets, including cryptocurrencies. Current analyses often examine the role of coordinated buying activity, often amplified by social media sentiment, in initiating such squeezes. The potential for rapid price appreciation and the subsequent liquidation of short positions are key factors that traders and investors monitor closely, particularly in assets with high short interest.
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