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Don't put all of your eggs in the same basket.

I have no clue how anyone, especially edge funds, could get majorly impacted by just one stock moving the wrong way.

I have stocks in my portfolio that move 25 to 50% the wrong way almost everyday and I still get about 1% overall gain daily in this bull market (which is probably not great in this economy).

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Shorts are a little unique in that the risk is technically infinite. Stocks you own can only lose whatever value you bought them for. Stocks youve promised to buy later from someone else, though, can lose you however much money they decide to charge you when you have to buy. They could have thousands of profitable positions and lose 2 billion off one very unlucky short call because of a meme.

Good point. Maybe they will learn something?

Well, I can't imagine we'll see any stocks shorted to 128% for a very long time. Probably not much else

Not a chance. The human mind generally isn't built to correctly assess the impact of unlikely, catastrophic events. Maybe they'll steer clear of excessive short selling for a while, but you can be sure they'll forget it eventually. In the meantime, they'll find some other pitfall to step in.

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