Liquidation
Forced closure of leveraged position when price hits liquidation threshold.
Liquidation: leveraged position auto-closes when collateral can't cover loss. Higher leverage = liquidation closer. Cascading: drop → long liqs → market sell → more drop → more liqs. Drives flash crashes.
In plain words
You open a leveraged position, where your money is the collateral. When price moves so far against you that the collateral can't cover the loss, the exchange auto-closes the position and takes your full collateral. No second chance. Higher leverage means closer to liquidation.
Example
Aug 5 2024 (BTC -10% in hour): $1.2B liqs in 24h. Nov 2022 (FTX): $3B cascade. Mar 2020 (COVID): $1.5B. Calm avg: $200M/day liqs.
Also known as: liquidation, likwidacja, liq