A leverage flush describes a rapid market event characterized by the forced liquidation of a large number of leveraged trading positions. This occurs when prices move sharply against highly leveraged traders, causing their collateral to fall below maintenance margins. Automated systems then close these positions, accelerating price movements in the direction of the initial drop or rise. Such events can result in significant market volatility and cascading liquidations.
Context
In crypto news, leverage flushes are frequently reported during periods of extreme market volatility, often amplifying price corrections or surges. These events are particularly prominent in the highly speculative cryptocurrency derivatives markets, where traders frequently employ substantial leverage. A key discussion point involves the systemic risk posed by these liquidations to market stability and participant confidence. Observing the frequency and magnitude of leverage flushes offers insight into the overall health and speculative intensity of the digital asset market.
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