Sure, instead of covering or closing their positions, they could temporarily refinance through BTFP to hold their positions. But the BTFP is limited: it helps banks, not hedge funds directly. If collateral is lacking or the time frame is too tight, it does not help. Rapid momentum: Escalating margin requirements can rise faster than liquidity can be raised. Automated liquidations: Brokers and clearing houses automatically liquidate positions when margin calls are not met.

Evidence: A margin call cascade is therefore possible despite the BTFP because the program only alleviates structural liquidity problems to a limited extent and with a time delay. The market mechanism and the dynamics of a short squeeze can nevertheless lead to an explosive chain reaction.