In the cryptocurrency and stock markets, there is an interesting phenomenon— the more the market rises, the easier it is to trigger more upward movement. One reason for this is the so-called 'short covering' effect. Short trading is originally intended to make money, but when the market rises, they instead become a 'catalyst' for the market. Today, let's talk about what 'short covering' is and why shorts become the 'fuel' that drives prices up.

How did shorts become 'helpers'?

For example, let's say you think Bitcoin is going to drop, so you short it through futures or contracts (that is, selling borrowed coins and planning to buy them back later when the price drops). But if the market doesn't go as you expected and instead starts to rise, that becomes awkward. As the price rises, your short position starts to incur losses, and the more you lose, the greater the pressure. To avoid further losses, you might be forced to close your position—meaning you buy back the coins you sold. At this point, your buying action will further drive up the price.