Mass Liquidation

Definition ∞ Mass liquidation refers to the widespread forced selling of leveraged positions in cryptocurrency markets, often triggered by a rapid and significant price decline. This event occurs when collateral values fall below maintenance margins, prompting exchanges or lending protocols to automatically close positions to prevent further losses. Such occurrences can accelerate market downturns and amplify price volatility. It is a critical event in highly leveraged markets.
Context ∞ Reports on mass liquidation frequently follow sharp market corrections, detailing the cascade effect on prices and the substantial losses incurred by leveraged traders. Discussions often analyze the systemic risks posed by high leverage in decentralized finance protocols. Market participants monitor indicators for potential future mass liquidation events to anticipate significant price movements, which can severely impact market stability. Understanding these events is crucial for risk management.