Leverage is trading with borrowed money so your position is bigger than your cash. Ten times leverage means a ten percent move against you can wipe out your whole stake. When that happens, the exchange force-closes your position to pay back the loan. That forced close is called a liquidation, and it is a market order that does not care about price.
Here is why that matters even if you never touch leverage yourself. When many leveraged traders sit at similar prices, one push can liquidate them all at once. Each forced sale drives price lower, which triggers the next liquidation, which drives price lower again. That chain reaction is a cascade, and it is why fast markets can drop far more than the news alone would justify.
Funding is the recurring fee that keeps these leveraged markets tied to the real price. When far more traders are long than short, longs pay a fee to shorts every few hours, and when the crowd is short, shorts pay longs. So funding is a live read on which side is crowded and how much it costs them to keep holding.
A squeeze is the flip side of a cascade. When almost everyone is short and price ticks up, their losses force them to buy back to close, and that buying pushes price up further, forcing more of them to buy. A short squeeze can rocket a token in minutes for no fundamental reason at all, purely because one crowded side got trapped.
You do not need to use leverage to use this knowledge. High and rising funding on the long side is a sign the crowd is stretched and a flush lower may be near. A market that just cascaded has often shaken out the weak hands, which is why sharp reversals so often follow the worst candles.
Leverage turns ordinary moves into cascades and squeezes because forced buying and selling feed on themselves. Watch funding to see which side is crowded and likely to get flushed.
Tip. When funding is extreme and everyone agrees on the direction, the crowded side is the fragile side. That is often the moment a squeeze or a cascade is set up to punish it.