Traders are mostly liquidated during a bullish market, specifically during sharp, sudden market liquidations known as "long squeezes."

While it sounds counterintuitive because prices are rising overall, bullish markets attract significantly higher retail volume, aggressive leverage, and a fear of missing out (FOMO). When a sudden, sharp downside correction happens in a bull market, it triggers a domino effect of liquidations for overleveraged buyers.

Crypto bull markets move upward in steps, but they correct violently. These downward corrections are highly localized, mechanics-driven events rather than fundamental changes:

• The Leverage Cascade (Long Squeeze): When market sentiment is extremely bullish, traders aggressively stack long positions using high leverage. A minor 3% to 5% price dip (often driven by standard profit-taking) instantly pushes these positions to their liquidation price.

• Forced Market Selling: Once a trader's margin threshold is crossed, crypto exchanges automatically market-sell their collateral to protect the exchange's liquidity. These forced market sells push prices down further, instantly triggering the liquidation of the next tier of over-leveraged traders.

• The Volatility Loop: This cascading domino effect causes "flash crashes" where an asset can drop 10% - 20% in minutes before rapidly bouncing back once the over-leveraged positions are completely wiped out.