Definition ∞ A speculative leverage purge refers to a rapid and often severe market event where excessive leveraged trading positions are forcibly closed, or liquidated, due to adverse price movements. This cascading effect occurs when prices move against highly leveraged traders, triggering automatic sell-offs that further accelerate price declines. It effectively removes overextended risk from the market. Such purges are characterized by sharp price drops.
Context ∞ Speculative leverage purges are frequently reported in crypto news, especially during periods of high volatility or significant price corrections. These events often reset market sentiment, leading to a healthier, less overleveraged market structure. Understanding these purges is essential for comprehending sudden, dramatic price shifts in digital asset markets.
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