One Sentence Explanation of "Long and Short Squeeze"
Long and Short Squeeze refers to a situation where the price violently fluctuates first downward, then upward (or vice versa) within a very short period: first, a downward wick liquidates those holding long positions, then an upward wick liquidates those holding short positions. The result is that regardless of whether you were bullish or bearish at the time, leveraged positions in both directions are forcibly closed. Hence the term "double kill," also jokingly called a "meat grinder."
Why Can You Lose Money Whether You Go Long or Short?
The core reason lies in leverage + the forced liquidation mechanism. Understanding what a liquidation is makes it clear:
- If you use 10x leverage to go long, a price drop of about 10% in the opposite direction can cause liquidation, wiping out your principal.
- If you use 10x leverage to go short, a price rise of about 10% in the opposite direction will similarly cause liquidation.
In a thin market with high control, pushing the price down 15% instantly and then pulling it back up 15% is not costly for the controlling entity, but it's enough to wipe out the longs below and the shorts above, one after the other. This is the truth behind "the price just oscillated sideways, but my account got wrecked on both sides."
Wicks and Funding Rates: The Two "Weapons" of a Squeeze
| Tool | How It's Used to Harvest |
|---|---|
| Wicks (Instant Extreme Volatility) | In a thin market, a single large order can instantly push the price through a mass of stop-losses and liquidation prices, triggering a cascade of liquidations. The price then quickly returns to its original level, leaving long upper/lower shadows on the candlestick chart. |
| Funding Rate | When one side (e.g., longs) becomes overly crowded, the funding rate is pushed to an extreme. The crowded side has to continuously pay fees, making it hard to hold positions, forcing them to exit or be slowly drained, setting the stage for a wick in the opposite direction. |
Which Coins Are Most Susceptible to Long and Short Squeezes?
- New coins with only perpetual contracts and no spot market: Lacking spot buy/sell orders to provide a price floor, their price is easiest to manipulate (see Why coins with only perpetual contracts and no spot market are dangerous).
- Coins with extremely small circulating supply and high control: Tokens are concentrated in a few addresses, making it cheap to pump and dump.
- Coins that have surged several times in a short period and are extremely hyped: Many people are chasing longs and shorts, creating a concentration of leverage – the perfect "fertilizer" for harvesting. Coins like RAVE, SIREN, MYX, COAI, LAB, which were repeatedly discussed in 2025–2026, fit this structure.
- Periods with a high concentration of leverage: When funding rates are extreme and Open Interest (OI) surges, the risk of a squeeze is highest.
How Can Beginners Avoid Being the One Harvested?
- Don't use high leverage: The higher the leverage, the smaller the wick needed to liquidate you. Low leverage, or even no leverage, is the most effective shield.
- Stay away from new, highly controlled perpetual coins: Especially those with only contracts and no spot market – just don't touch them.
- Use spot trading instead of contracts: Spot positions cannot be liquidated. A wick might cause a temporary paper loss, but it won't wipe out your account.
- Don't chase trades when funding rates are extreme: An extreme funding rate is often a signal that one side is overly crowded and a reversal or squeeze is imminent.
- Set stop-losses, but don't rely on them blindly: During a wick, your stop-loss might get filled at a much worse price due to slippage. True safety comes from "small position size + low leverage + avoiding garbage markets."
Summary
A long and short squeeze uses "violent two-way volatility + the leverage liquidation mechanism" to wash out both long and short traders sequentially. Wicks are responsible for instantly breaking through liquidation prices, while funding rates continuously drain the crowded side. It is most common in highly controlled, perpetual-only new coins. The safest strategy for beginners isn't to study "how to dodge wicks," but to stay away from such markets and high leverage from the start. Further reading: Why coins with only perpetual contracts and no spot market are dangerous, Should you trade newly listed perpetual small-cap coins?. This article is for risk education purposes and does not constitute investment advice.