Definition ∞ Cryptocurrency leverage allows traders to control larger positions in digital assets with a smaller amount of initial capital. This financial instrument amplifies trading power by borrowing funds, enabling participants to open positions significantly larger than their deposited collateral. While it can magnify potential gains from price movements, it equally increases the risk of substantial losses, including forced liquidation of the leveraged position. Leverage is commonly offered on centralized and decentralized exchanges for various digital assets.
Context ∞ Cryptocurrency leverage trading is a prominent feature in digital asset markets, frequently appearing in news related to market volatility, liquidations, and regulatory scrutiny. The availability of high leverage ratios often contributes to market instability and sudden price swings, particularly during periods of economic uncertainty. Regulators globally are increasingly examining leverage offerings due to concerns about investor protection and systemic risk within the crypto ecosystem.
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