What Is "Liquidation Cascade" in a Highly Volatile Crypto Market? ▴ Learn

What Is “Liquidation Cascade” in a Highly Volatile Crypto Market?

A liquidation cascade occurs when a sharp price drop triggers a wave of forced liquidations of highly leveraged positions. These liquidations involve selling the underlying collateral, which further pushes the price down, triggering more liquidations in a rapid, self-reinforcing spiral.

This phenomenon is a major risk in high-leverage crypto markets.

What Is a ‘Liquidation Cascade’ and How Can It Be Front-Run?

How Does the Concept of “Reflexivity” Apply to the Collapse of Algorithmic Stablecoins?

How Does the Leverage Ratio in Derivatives Trading Determine the Trigger Point for a Liquidation Cascade?

What Is the Risk of “Cascading Liquidations” in Leveraged Crypto Trading?