Liquidation Proceedings

Definition ∞ Liquidation proceedings in finance involve the process of converting assets into cash to settle debts, often occurring when an entity is insolvent. In cryptocurrency, this typically refers to the automatic sale of collateralized digital assets when their value falls below a predetermined threshold. This action aims to cover outstanding loan obligations. Such events are programmed into smart contracts on decentralized lending platforms.
Context ∞ Crypto news frequently reports on liquidation events within decentralized finance (DeFi) lending platforms, especially during periods of high market volatility. These proceedings can trigger significant price movements and impact market stability. Understanding the parameters of liquidation is crucial for participants in collateralized lending protocols. The frequency of these events often indicates market stress.