I've noticed that the crypto community constantly discusses short squeezes, but not everyone understands what they really are. I'll try to clarify it together with you.

A short squeeze is a phenomenon where the price of an asset suddenly skyrockets due to the mass closing of short positions. It sounds simple, but the mechanics of this process create a real market storm. When traders open shorts, they believe the price will fall and borrow the asset from a broker to sell it. But if the price suddenly starts rising — due to news, large purchases, or just market reevaluation — short sellers find themselves at a loss.

Then the interesting part begins. As the price continues to rise, brokers start liquidating positions forcibly, and traders are forced to buy back the asset at increasing prices. This creates a chain reaction: the more liquidations there are, the higher the price jumps, which causes even more liquidations. It results in an avalanche effect, and the price can completely detach from the fundamentals.

A short squeeze is not just theory — history has bright examples. I remember in 2021, GME soared from $20 to $483 in just a few days. Retail investors bought en masse, short sellers panicked, liquidations started — and suddenly, the price was mooning. In crypto, this happens even more often: Bitcoin and altcoins constantly put on such shows, especially when volatility is off the charts.

How to use this in real trading? First, look at the percentage of open shorts — if it’s high, that’s a potential signal. Second, monitor liquidations on the futures market. When they start increasing, it could be the beginning of a chain reaction. Third, pay attention to trading volumes. A sharp spike in volumes during an upward move often precedes a squeeze.

Currently, the market situation is interesting. BTC stays around $81.63K with a slight gain of +0.38%, ETH shows -0.76%, and BNB is growing by +2.93%. With such volatility, short squeezes can happen at any moment.

But remember: a short squeeze is a two-way process. If you get caught in one, losses can be significant. This is not financial advice, just market observation.