# How Does Market Manipulation Affect the Liquidation Process on a CEX? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

---

## How Does Market Manipulation Affect the Liquidation Process on a CEX?

Manipulators can attempt to artificially move the price (a "pump and dump" or "spoofing") to trigger liquidations of opposing positions, profiting from the forced selling. While CEXs use a "mark price" to mitigate this, sustained manipulation can still force the mark price down, triggering a cascade of liquidations and accelerating a death spiral.

- [How Does the Mark Price Mechanism Protect against Temporary Market Manipulation?](https://learn.greeks.live/path/how-does-the-mark-price-mechanism-protect-against-temporary-market-manipulation/)

- [How Do Accounting Standards Differentiate between ‘Mark-to-Market’ and ‘Mark-to-Model’ for Valuing Assets?](https://learn.greeks.live/path/how-do-accounting-standards-differentiate-between-mark-to-market-and-mark-to-model-for-valuing-assets/)

- [Can a Trader Be Liquidated Based on Mark Price but Still Have a Positive P&L Based on Last Traded Price?](https://learn.greeks.live/path/can-a-trader-be-liquidated-based-on-mark-price-but-still-have-a-positive-pl-based-on-last-traded-price/)

- [What Is the Risk of “Funding Rate Arbitrage” during Periods of Extreme Market Stress?](https://learn.greeks.live/path/what-is-the-risk-of-funding-rate-arbitrage-during-periods-of-extreme-market-stress/)

- [Why Do Exchanges Use a Mark Price Instead of the Last Traded Price for Liquidation?](https://learn.greeks.live/path/why-do-exchanges-use-a-mark-price-instead-of-the-last-traded-price-for-liquidation/)

- [How Does High Leverage Amplify the Potential for a Margin System to Be Overwhelmed?](https://learn.greeks.live/path/how-does-high-leverage-amplify-the-potential-for-a-margin-system-to-be-overwhelmed/)

- [What Are the Potential Downsides or Risks Associated with the Mark-to-Market Process Itself?](https://learn.greeks.live/path/what-are-the-potential-downsides-or-risks-associated-with-the-mark-to-market-process-itself/)

- [How Does a CEX’s Know Your Customer (KYC) Policy Aid in Preventing Manipulation?](https://learn.greeks.live/path/how-does-a-cexs-know-your-customer-kyc-policy-aid-in-preventing-manipulation/)

## Glossar

### [The Liquidation Process](https://learn.greeks.live/area/the-liquidation-process/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Process ⎊ The liquidation process is the automated, irreversible sequence of events triggered when a leveraged position's collateral value falls below the minimum maintenance margin required by a derivatives or lending protocol.

### [Mark Price](https://learn.greeks.live/area/mark-price/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Valuation ⎊ The Mark Price within cryptocurrency derivatives represents a fair value estimation, calculated to mitigate price manipulation and ensure orderly market functioning, particularly during periods of low liquidity or volatility.

### [Market Manipulation](https://learn.greeks.live/area/market-manipulation/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Detection ⎊ Identifying sophisticated market manipulation, such as layered spoofing or coordinated pump-and-dump activity, requires advanced, real-time analysis of order flow data.

## Discover More

### [How Does the 'Know Your Customer' (KYC) Process Aid in Preventing Market Manipulation?](https://learn.greeks.live/path/how-does-the-know-your-customer-kyc-process-aid-in-preventing-market-manipulation/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the 'Know Your Customer' (KYC) Process Aid in Preventing Market Manipulation?](https://learn.greeks.live/wp-content/uploads/2025/10/Decoupled-Cryptographic-Asset-Custody-Mechanism-Exhibiting-Interconnected-Data-Conduit-Structures.webp)

KYC links trading accounts to real identities, creating an audit trail that deters and helps to trace manipulative activities.

### [Who Typically Executes the Liquidation Process in a Decentralized System?](https://learn.greeks.live/path/who-typically-executes-the-liquidation-process-in-a-decentralized-system/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Who Typically Executes the Liquidation Process in a Decentralized System?](https://learn.greeks.live/wp-content/uploads/2025/10/Abstract-Representation-of-Digital-Asset-Structure-Versus-Options-Hedging-Gamma-Exposure-Mechanisms.webp)

Decentralized 'keepers' or 'liquidators' who monitor and execute the liquidation transaction for a reward (liquidation bonus).

### [How Does the Liquidation Process Work on a Crypto Futures Exchange?](https://learn.greeks.live/path/how-does-the-liquidation-process-work-on-a-crypto-futures-exchange/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does the Liquidation Process Work on a Crypto Futures Exchange?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Entanglement-Energy-Flow-Modeling-Decentralized-Finance-Derivative-Pricing-Mechanisms.webp)

An automated process that closes an under-margined position to prevent losses exceeding the account's equity.

### [Can a Sandwich Attack Be Executed on a CEX? Why or Why Not?](https://learn.greeks.live/path/can-a-sandwich-attack-be-executed-on-a-cex-why-or-why-not/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can a Sandwich Attack Be Executed on a CEX? Why or Why Not?](https://learn.greeks.live/wp-content/uploads/2025/10/High-Fidelity-Macro-View-Optical-Disc-Read-Head-Scrutinizing-Digital-Asset-Settlement-Layer-Mechanisms.webp)

No, because CEXs use a private order book and a deterministic matching engine, making it impossible for external bots to front-run or reorder trades.

### [What Are the Key Risks Associated with Using a CEX?](https://learn.greeks.live/path/what-are-the-key-risks-associated-with-using-a-cex/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Key Risks Associated with Using a CEX?](https://learn.greeks.live/wp-content/uploads/2025/10/Cryptocurrency-Derivative-Mechanism-Disassembly-Revealing-Atomic-Swap-Settlement-Infrastructure.webp)

Custodial risk (loss of funds due to hack or insolvency), regulatory risk, and counterparty risk.

### [Does the Delivery Process Introduce Its Own Unique Manipulation Risks?](https://learn.greeks.live/path/does-the-delivery-process-introduce-its-own-unique-manipulation-risks/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Does the Delivery Process Introduce Its Own Unique Manipulation Risks?](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-X-Wing-Configuration-Simulating-Decentralized-Autonomous-Organization-Governance-Token-Flow-Over-Mountainous-Liquidity-Basins.webp)

Yes, risks include delivery squeeze and manipulation of asset quality or timing; managed by strict protocols and monitoring.

### [What Is the Difference between Front-Running on a CEX versus a DEX?](https://learn.greeks.live/path/what-is-the-difference-between-front-running-on-a-cex-versus-a-dex/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Difference between Front-Running on a CEX versus a DEX?](https://learn.greeks.live/wp-content/uploads/2025/10/Quantum-Ledger-Imbalance-Visualized-Through-Reflective-Medium-and-Spherical-Volatility-Index.webp)

CEX front-running is typically insider or privileged access; DEX front-running is protocol-level MEV by validators/miners.

### [Is Slippage More Common on a CEX or a DEX? Why?](https://learn.greeks.live/path/is-slippage-more-common-on-a-cex-or-a-dex-why/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Is Slippage More Common on a CEX or a DEX? Why?](https://learn.greeks.live/wp-content/uploads/2025/10/Asymmetrical-Exposure-Quantification-in-Decentralized-Finance-Derivative-Pricing-Mechanism.webp)

More common on a DEX due to lower liquidity and reliance on algorithmic pricing rather than a deep order book.

### [What Is the Legal Status of Customer Assets in a CEX Bankruptcy?](https://learn.greeks.live/path/what-is-the-legal-status-of-customer-assets-in-a-cex-bankruptcy/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Is the Legal Status of Customer Assets in a CEX Bankruptcy?](https://learn.greeks.live/wp-content/uploads/2025/10/Luminescent-Crystalized-Pointer-Analogy-for-DeFi-Protocol-Governance-Token-Vesting-Schedules.webp)

Often treated as unsecured creditors, meaning their assets are subject to bankruptcy proceedings and partial recovery.

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**Original URL:** https://learn.greeks.live/learn/how-does-market-manipulation-affect-the-liquidation-process-on-a-cex/
