A long position wipeout occurs when a leveraged long position in a financial asset is forcefully closed due to a significant price decline. This event, often termed liquidation, happens when the asset’s price falls below a certain threshold, causing the investor’s collateral to become insufficient to cover potential losses. Automated systems then sell the asset to prevent further losses for the broker or exchange. It results in the complete loss of the capital allocated to that specific position.
Context
Crypto news frequently reports on long position wipeouts, especially during periods of high market volatility, as they can amplify price movements. These liquidations often occur on derivatives exchanges where traders use leverage, and large-scale wipeouts can trigger further selling pressure. Understanding this phenomenon is essential for interpreting sudden, sharp price drops in digital asset markets.
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