Immediate liquidation occurs when a leveraged trading position is automatically closed by an exchange due to insufficient margin. This automated process is triggered when the value of a trader’s collateral falls below a predetermined maintenance margin level, typically due to adverse price movements. To prevent further losses to the exchange or lending platform, the position is forcibly closed, often at market price. This mechanism protects the solvency of the trading platform.
Context
Immediate liquidation events are common in volatile cryptocurrency markets, particularly for traders utilizing high leverage. Large-scale liquidations can accelerate price declines, creating cascading effects across the market. News reports often detail the total value of liquidated positions during periods of significant price corrections, highlighting market instability.
A critical access control failure in the payments contract allowed an unauthorized ownership alteration, leading to an immediate, systemic $3.1M liquidity drain.
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