📉 Why Can a Drop in Bitcoin’s Price Lead to an Even Bigger Drop? Learn About Liquidation Cascades!
When traders use leverage, they borrow to gain exposure greater than the capital they have.
For example:
- Capital: US$100
- Leverage: 10x
- Position value: US$1,000
If the price moves against them, losses can eat into their capital much faster.
When there is no longer enough margin, positions may be liquidated automatically. If many long positions are liquidated at the same time, selling pressure can intensify.
This phenomenon is called a liquidation cascade.
During the latest market downturn, The Block reported around US$1.47 billion in liquidations over 24 hours during the period covered in its report.
Takeaway: Volatility isn’t the only risk. Excessive leverage can magnify losses.
Do you think using high leverage is still worthwhile when the market is unstable?
#CryptoEducation #Bitcoin #TradingRiskManagement #Leverage
When traders use leverage, they borrow to gain exposure greater than the capital they have.
For example:
- Capital: US$100
- Leverage: 10x
- Position value: US$1,000
If the price moves against them, losses can eat into their capital much faster.
When there is no longer enough margin, positions may be liquidated automatically. If many long positions are liquidated at the same time, selling pressure can intensify.
This phenomenon is called a liquidation cascade.
During the latest market downturn, The Block reported around US$1.47 billion in liquidations over 24 hours during the period covered in its report.
Takeaway: Volatility isn’t the only risk. Excessive leverage can magnify losses.
Do you think using high leverage is still worthwhile when the market is unstable?
#CryptoEducation #Bitcoin #TradingRiskManagement #Leverage