Amr Taha
A large long liquidation event (~$245.3M) occurred at ~$89.7K (long squeeze), followed by a massive decrease in open interest.
Long and Short Squeezes: How and Why They Happen? Both long squeezes and short squeezes are liquidation cascades in leveraged markets, where forced liquidations fuel rapid price movements. They occur due to excessive leverage, low liquidity, and market imbalances. 1-During a Long Liquidation (Price Dropping Fast) * Longs are forced to sell as liquidation engines automatically close positions. * Price rapidly moves downward, hitting large buy limit orders placed by whales and market makers. * This buying pressure stabilizes price, often creating a support level. 2- Capturing Liquidity * Liquidation events create huge volume spikes, meaning large orders can get filled without major slippage. * Whales and institutions absorb panic selling (long squeeze) or FOMO buying (short squeeze). 3- Better Execution Price for Market maker * Market makers use limit orders because they can buy cheap in long squeezes and sell high in short squeezes. * They let liquidations fill their orders instead of chasing price with market orders. 4- Reversal Potential & Stop Hunt Strategy * Many traders place stop-losses near liquidation zones. * Whales use limit orders to absorb the stop-loss liquidity before reversing the price in their favor. Key Observations:. ✔ Liquidation areas create massive liquidity pools → perfect for limit order fills. ✔ Whales and market makers absorb liquidations to profit from over-leveraged traders. ✔ Using limit orders in liquidation zones can improve trade execution and risk management. ✔ Most of the time, long squeeze areas become new support, and short squeeze areas become resistance.