A sharp movement of a crypto asset’s price triggered by mass forced closure of leveraged positions. Two types are commonly distinguished:
Squeezes are particularly pronounced in crypto markets due to the prevalence of high leverage and the low liquidity of many individual assets.
- Short squeeze — a rapid price surge that forces short positions to be closed at a loss through buy-backs, which in turn pushes the price even higher.
- Long squeeze — an opposite scenario: a sharp price drop forces long positions to be liquidated through asset sales, amplifying the decline.
Squeezes are particularly pronounced in crypto markets due to the prevalence of high leverage and the low liquidity of many individual assets.