If your stocks is heavily shorted, you pay people to coordinate a “short queeze”, driving an artificial stock increase.
Testing my own understanding
Hedge fund typically has both long and short positions (hence hedge).
As a result of the short squeeze, hedge fund faced with portfolio balancing and risk management has to close their short positions, and potentially liquidating some long profitable positions.
This liquidation of long positions may then trigger other hedge funds risk stop of long profitable positions.
This may then trigger a dip in profitable trades, and retail investors buy the dip.
The more retail investors buy the dip, the more hedge fund may shift into an overall bear/short position.
Until there are no more retail investors participating in coordinated bear attack or buy the dip, then it could commence the start of the vicious cycle.
Hedgefund can then initiate short overall market (The Big Short V2), offload their holdings and it will be a test of the retail traders nerve and will (an “equity” run ). They will liquidate their profitable positions in Bitcoin to cover losses, which may spook other retail investors to liquidate bitcoin, becoming a double whammy, equity down, bitcoin down. Will there still be retail investors to buy the dips?
With the coming April US filing of tax returns, more liquidation to pay tax will be required.
Should I put my money where my mouth is and go short? 樂
28 Jan 21 Developing Story
29 Jan 21
Another nail in democracy, free market and crony capitalism