Leveraged Unwinding

Definition ∞ Leveraged Unwinding describes the forced closure of leveraged trading positions, typically initiated by exchanges or lending protocols when an asset’s price moves adversely. This process occurs automatically to prevent further losses and maintain collateral requirements. It can trigger cascading liquidations, intensifying market volatility and price declines. Such events are a common feature of highly speculative digital asset markets.
Context ∞ Leveraged Unwinding frequently features in cryptocurrency news during periods of significant market downturns or sudden price corrections. These events often exacerbate selling pressure, leading to rapid price drops across various digital assets. Analysts closely monitor liquidation data as an indicator of market health and potential future volatility. Understanding this mechanism is essential for interpreting rapid market movements in crypto.