What is the definition of liquidation in the context of cryptocurrency?

3 answers

• Dec 16, 2021 · 3 years ago
  Liquidation in the context of cryptocurrency refers to the process of closing out a trader's positions when their account balance falls below a certain threshold, usually due to excessive losses or insufficient margin. When a trader's account is liquidated, their open positions are automatically sold off to cover the losses, and the remaining funds are used to repay any outstanding debts. This is done to protect the exchange and other traders from potential losses. It's important for traders to understand the liquidation process and manage their risk accordingly to avoid being liquidated.
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• Dec 16, 2021 · 3 years ago
  Liquidation in cryptocurrency trading is like a safety net that prevents traders from losing more money than they have. When a trader's account balance drops below a certain level, the exchange will automatically close their positions to limit further losses. This is done to ensure that traders can't accumulate massive debts and potentially bankrupt themselves. While liquidation can be seen as a protective measure, it can also be a source of frustration for traders who may feel that they were forced out of their positions prematurely. It's important for traders to understand the liquidation rules of the exchange they are using and manage their risk effectively.
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• Dec 16, 2021 · 3 years ago
  Liquidation is an important aspect of cryptocurrency trading that helps maintain market stability and protect traders from excessive losses. When a trader's account balance falls below the required margin level, the exchange will liquidate their positions to cover the losses. This ensures that traders cannot accumulate large debts and helps prevent market manipulation. At BYDFi, we have implemented a robust liquidation system that aims to protect our traders and maintain a fair trading environment. Traders should always be aware of the liquidation rules and risk management strategies to mitigate potential losses.
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