Definition ∞ A leveraged position in cryptocurrency trading involves using borrowed capital to amplify potential gains from price movements. Traders collateralize a portion of the total trade value and borrow the remainder, increasing their exposure to the asset. While this can magnify profits, it also substantially increases the risk of liquidation and significant losses. Such positions are common in derivatives markets, including futures and perpetual swaps.
Context ∞ The prevalence of leveraged positions on both centralized and decentralized exchanges contributes to market volatility and systemic risk. Regulatory bodies are increasingly scrutinizing platforms offering high leverage due to investor protection concerns. Discussions frequently address appropriate risk disclosures, margin requirements, and the impact of rapid liquidations on overall market stability during periods of stress.
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