One thing I don’t understand.

Let’s say the price get so high that all shorts are not able to cover their bets and declare bankruptcy, what would happen next? As all these financial institutions, be it hedge funds, investment banks, brokers and others are intricately inter connected, when one fails it might trigger a chain reaction to bring down their counterparties.

Would GME trigger an earthquake and cause the entire capital market to collapse?

.
Remember, the Hedge-funds/Mutual-funds  horded millions of GME shares at a price of about US$10 each a few months ago, ie in Sep 2020, GME share price was about US$10. If you had bought GME shares earlier today at the dip of about US$60 each, the HF/MF were still profiting about 600% by selling their US$10 GME shares to you.
....... And if the GME share price drops to < US$40 tomorrow, you will suffer substantial losses.
.

crazy.
sell it and get 2 at $20.