Crypto Market Liquidations

Definition ∞ Crypto Market Liquidations involve the forced closure of leveraged trading positions in cryptocurrency markets when a trader’s collateral falls below a required maintenance margin. This automated process occurs to prevent further losses for the exchange or lending platform. Large-scale liquidations can accelerate price declines, creating cascading effects. These events often signal heightened market stress.
Context ∞ News frequently reports on crypto market liquidations during periods of extreme price volatility, as these events can significantly amplify market movements. Traders closely monitor liquidation data to assess market sentiment and identify potential support or resistance levels. Understanding these liquidations provides insight into market leverage and risk.