Leveraged liquidations are the forced closure of a trading position by an exchange or decentralized protocol when an investor’s collateral value falls below a predetermined maintenance margin. This event is typically triggered by adverse price movements in the underlying asset. The process safeguards lenders from potential default.
Context
These liquidations are a frequent occurrence in highly volatile cryptocurrency markets, especially during rapid price declines. Large-scale liquidations can exacerbate market downturns, initiating a cascade effect that is a common subject in market analysis and breaking news reports during periods of instability.
The crypto market experienced a sharp downturn, with Bitcoin and Ethereum prices falling significantly amidst expiring options and banking sector concerns.
A sudden tariff announcement by the U.S. President caused the crypto market to shed over $100 billion in just three hours, intensifying liquidation pressures.
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