Definition ∞ Bitcoin Liquidation occurs when a leveraged trading position in Bitcoin is forcibly closed by an exchange due to the asset’s price moving against the trader’s prediction. This automatic closure happens when the collateral held in the trading account falls below a specific maintenance margin level. It serves as a risk management measure to prevent traders from incurring further losses beyond their initial margin. These events often result in the complete loss of the trader’s collateral.
Context ∞ Bitcoin liquidation events are frequently reported in crypto news, especially during periods of high market volatility, as they can significantly impact market dynamics. The discussion often concerns the risks associated with high-leverage trading and its effect on overall market stability. Future trends may involve exchanges implementing more sophisticated risk engines and educational resources for traders.
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