Excessive Leverage describes a situation where an individual or entity utilizes a disproportionately large amount of borrowed capital relative to their own equity. This practice amplifies potential gains but also significantly increases the risk of substantial losses. In financial markets, it can lead to forced liquidations during adverse price movements. Such high debt levels pose considerable systemic risk.
Context
In cryptocurrency markets, excessive leverage is a recurring theme in news discussions, particularly during periods of high volatility. Reports often link significant market downturns to widespread liquidations of over-leveraged positions, contributing to cascading price declines. The presence of excessive leverage remains a key concern for market stability and regulatory oversight within the digital asset trading environment.
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