A melt-up is an informal description of a strong, often accelerating price rise in which enthusiasm and the rush to participate become important drivers. The term commonly suggests that prices are advancing faster than improvements in underlying fundamentals can readily explain.
How buying can reinforce itself
Rising prices attract attention, encouraging previously cautious investors to buy. Traders following momentum may add exposure, and investors who lag a benchmark may feel pressure to catch up. These flows can reinforce the rally as expectations of further gains attract more demand.
Positive economic or project news can coexist with this behavior; calling a move a melt-up does not prove that it has no fundamental support. In crypto, strong narratives and rapidly spreading price stories can intensify the enthusiasm.
A description, not a timing signal
A melt-up is broader than a short squeeze. Short covering can contribute, but a short squeeze specifically involves pressure on bearish positions to close. A melt-up does not require that mechanism, nor is it defined by a universal percentage increase or duration.
Prices may become vulnerable when enthusiasm fades or expectations disappoint. Even so, the label does not establish when a peak will arrive or guarantee an immediate crash. Buying solely because gains are accelerating, or shorting solely because prices seem excessive, can both produce losses.