Definition ∞ Liquidation events occur when an asset or position is forcibly sold to cover a debt or margin call, typically due to a decline in its value below a specified threshold. This process aims to mitigate further losses for lenders or counterparties in leveraged trading scenarios. Such events can trigger cascading sell-offs, impacting market prices.
Context ∞ In decentralized finance (DeFi) and margin trading platforms within the crypto space, liquidation events are a critical mechanism for managing risk but can also lead to significant price volatility. News reports frequently detail large-scale liquidations occurring during periods of sharp market downturns, explaining their impact on asset prices and the stability of lending protocols. Understanding these events is vital for comprehending market behavior during stressed conditions.
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