Forced selling refers to the involuntary liquidation of digital assets by an owner. This action typically occurs when an investor cannot meet collateral requirements for a loan or margin position, leading to automated system liquidations. It can also arise from regulatory mandates or legal judgments compelling asset disposal. Such sales are not discretionary market decisions but rather compulsory transactions driven by external obligations or system rules.
Context
Crypto news frequently reports on forced selling events during periods of high market volatility, particularly affecting leveraged positions or DeFi lending protocols. These events can exacerbate downward price movements, creating cascading liquidation effects. Understanding the mechanisms behind forced selling is crucial for assessing market contagion risks.
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