Ethereum Liquidation occurs when a leveraged trading position involving Ethereum is automatically closed by an exchange or lending protocol. This forced closure happens because the value of the collateral backing the position falls below a predetermined threshold, known as the maintenance margin. It serves as a protective measure to prevent the trader’s losses from exceeding their initial margin. These liquidations are a common event in volatile markets.
Context
Ethereum liquidation events are regularly highlighted in crypto news, especially during periods of significant price movements in the Ether market. The discussion often focuses on the impact of these events on overall market liquidity and the potential for cascading liquidations. Future developments may involve more sophisticated risk management tools within decentralized finance protocols to manage collateral efficiently.
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