What Is Crypto Liquidation & How Do I Avoid It?

Cryptocurrencies are known for their volatility. This makes them prime targets for liquidation. Liquidation, the bogeyman of crypto trading, occurs when an investor cannot meet the margin requirement for their leveraged position. Traders increase the funds they can trade with by borrowing from a third party — in this case, an exchange. 

While leveraging or borrowing funds to increase trade positions can multiply potential gains, it’s a highly risky move. You could lose your initial margin or capital if the market moves against your leveraged position.

This article will delve into the meaning of crypto liquidation, how you can avoid it and what to do when it happens. We’ll also look at why volatile trading environments are more prone to liquidation. Let’s get started!