What is the meaning of short covering in the context of cryptocurrency trading?

1 answers

• May 12, 2022 · 3 years ago
  Short covering is an essential aspect of cryptocurrency trading. When traders short a cryptocurrency, they are essentially betting that the price will go down. However, if the price starts to rise, short sellers may start to panic and buy back the cryptocurrency to close their positions. This buying pressure can lead to a short squeeze, where the price rapidly increases due to the rush of short sellers covering their positions. Short covering can have a significant impact on market sentiment and can create volatile price movements. Traders need to be aware of short covering and its potential effects on the market.
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