Asset liquidation refers to the conversion of assets, digital or traditional, into cash or an equivalent. In cryptocurrency, this involves selling holdings to realize their value. This process can be voluntary, driven by investment strategies, or involuntary, often due to margin calls or protocol-mandated sales. It represents a definitive exit from a specific asset position.
Context
News reports frequently discuss asset liquidation in scenarios of market instability or regulatory action, where forced sales can amplify price declines. For decentralized finance, liquidation mechanisms are integral to lending protocols, automatically closing collateralized positions when asset values fall below a set threshold. This action directly impacts market supply and pricing dynamics.
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