How Does the Depth of the Order Book Influence the Severity of a Liquidation Cascade?

A shallow order book, meaning there are few buy and sell orders at various price levels, significantly increases the severity of a liquidation cascade. When a large liquidation order hits a shallow book, there is insufficient opposing volume to absorb the selling pressure.

This causes the price to drop dramatically with minimal trading, accelerating the cascade and triggering more liquidations at lower prices.