👨🏾💻 Dev corner: what actually happens in a liquidation
Over 1.3B USD in crypto futures were liquidated in 24 hours on Nov 13, mostly longs. Here's the mechanism:
🔹 Margin: you put up 1,000 USDT as collateral
🔹 Leverage: at 10x, you control a 10,000 USDT position
🔹 The math: a 10% move against you wipes out your 1,000 USDT
🔹 Maintenance margin: the exchange closes your position before your balance hits zero, so liquidation comes a bit earlier than 10%
Why crashes speed up:
🔹 A liquidation is a forced market order. Liquidated longs become sellers
🔹 That selling pushes price to the next group of liquidation levels, and the chain continues
🔹 You can see the flush in open interest: it fell to about 30.3B USD from 32.0B on Nov 13 (Ted Pillows market report)
Insurance funds exist to cover the gap when a position can't be closed at a good enough price.
Safety basics:
🔹 Lower leverage gives you more room
🔹 Isolated margin limits the loss to one position
🔹 Set a stop loss before the exchange sets one for you
What leverage do you usually use, if any? 👇
(Not financial advice)
📷 Photo: m. / Unsplash
Over 1.3B USD in crypto futures were liquidated in 24 hours on Nov 13, mostly longs. Here's the mechanism:
🔹 Margin: you put up 1,000 USDT as collateral
🔹 Leverage: at 10x, you control a 10,000 USDT position
🔹 The math: a 10% move against you wipes out your 1,000 USDT
🔹 Maintenance margin: the exchange closes your position before your balance hits zero, so liquidation comes a bit earlier than 10%
Why crashes speed up:
🔹 A liquidation is a forced market order. Liquidated longs become sellers
🔹 That selling pushes price to the next group of liquidation levels, and the chain continues
🔹 You can see the flush in open interest: it fell to about 30.3B USD from 32.0B on Nov 13 (Ted Pillows market report)
Insurance funds exist to cover the gap when a position can't be closed at a good enough price.
Safety basics:
🔹 Lower leverage gives you more room
🔹 Isolated margin limits the loss to one position
🔹 Set a stop loss before the exchange sets one for you
What leverage do you usually use, if any? 👇
(Not financial advice)
📷 Photo: m. / Unsplash
