Leveraged Liquidations

Definition ∞ 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.