👨🏾‍💻 Dev corner: what is a liquidation cascade?

Over 1 billion USD in crypto positions were liquidated in 24 hours this weekend, mostly longs.

Here's how it snowballs:
1️⃣ Price dips
2️⃣ Leveraged longs hit their liquidation price
3️⃣ The exchange force-sells their positions
4️⃣ That selling pushes price lower
5️⃣ More longs get liquidated

Like dominoes, each one knocks over the next. That's why crypto can fall 5% in minutes, then bounce once the forced selling is done.

$BTC $ETH

#BitcoinFiveWeeklyLosses

📷 Photo: Robert Stump / Unsplash