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Lesson 6 of 7

Can aggressive shorting be mitigated, and if so, how?

Short pressure becomes destabilizing when leverage exceeds spot absorption capacity or when supply overhang is obvious. The most effective mitigation is structural:

1. Strengthen Spot Liquidity: Deep, tight books reduce the ability of derivatives-driven moves to dislocate price.

2. Align Supply: Avoid large unlocks or emission spikes during periods of elevated short interest. Predictable supply reduces directional conviction against the token.

3. Monitor Derivatives Metrics: Track funding rates, open interest relative to spot depth, and liquidation clusters. Extreme imbalances often precede squeezes or cascades.

4. Reinforce Demand Drivers: Short positions are most aggressive when fundamentals appear weak or narrative momentum fades. Real usage and credible execution limit sustained directional pressure.

Attempts to "fight" shorts directly are rarely effective. The goal is not suppression — it is building a market structure resilient enough that leverage cannot overwhelm it.

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