How does gamma squeeze affect the price of digital currencies?

3 answers

• EscorealeFeb 09, 2025 · 6 months ago
  The gamma squeeze is a phenomenon that occurs when there is a sudden surge in demand for a particular digital currency, causing its price to skyrocket. This is often driven by a large number of options traders buying call options on the currency, which in turn leads to a rapid increase in the price. The gamma squeeze can have a significant impact on the overall market sentiment and can attract more investors to jump on the bandwagon, further driving up the price. However, it's important to note that the gamma squeeze effect is not sustainable in the long term and can lead to a sharp correction once the buying pressure subsides.
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• Mylene SalvadoFeb 25, 2025 · 6 months ago
  When a gamma squeeze happens, it can create a frenzy in the market as traders rush to buy the digital currency, fearing they will miss out on potential gains. This increased demand drives up the price, sometimes to unsustainable levels. The gamma squeeze effect is often fueled by social media hype and can be short-lived. It's crucial for investors to be cautious and not get caught up in the hype, as the price can quickly plummet once the squeeze is over.
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• TharunnMay 29, 2025 · 3 months ago
  The gamma squeeze effect is similar to a short squeeze, but instead of targeting short sellers, it targets options traders. When a large number of call options are purchased, the market makers who sold those options need to hedge their positions by buying the underlying asset, which in this case is the digital currency. This increased buying pressure drives up the price, creating a feedback loop that further amplifies the squeeze. It's important for traders to be aware of the gamma squeeze effect and its potential impact on the price of digital currencies, as it can present both opportunities and risks in the market.
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