How Does the Liquidation Process on a Crypto Futures Exchange Typically Work?
Liquidation occurs when a trader's margin balance falls below the maintenance margin requirement. The exchange's risk engine automatically takes over the position.
It attempts to close the position at the best available price to prevent further losses. If the position cannot be closed above the bankruptcy price, the insurance fund covers the deficit.
This process is crucial for maintaining the solvency of the exchange and protecting other users.
