Short Squeeze
Sudden price surge forcing short sellers to cover, accelerating the rise.
A short squeeze is a situation where a sudden price rise forces short positions to liquidate or manually close — those purchases push the price even higher, creating a spiral.
How it happens: 1. Many short positions (high short interest / open interest) 2. Price starts unexpectedly rising 3. Short positions go into loss → stop-losses activate 4. Buying to cover shorts pushes price even higher 5. Cascade liquidation accelerates the rise
Examples:
•GameStop (GME) 2021 — retail vs hedge funds on stocks
•Crypto: any sudden pump on a coin with high short OI
How to spot potential short squeeze:
•High negative funding rate (many shorts paying)
•High OI + price starts rising
•Liquidation heatmap shows short liquidation zones
Tools: Coinglass liquidation heatmap, Binance funding rate history.