The MANTRA (OM) token’s wild crash on Apr 13, 2025, shocked the crypto world. Discover the causes, fallout, and what’s next in MANTRA’s road to recovery.

In the morning and daytime hours of Apr 13, 2025, the MANTRA blockchain's native token, OM, sat at a respectable market cap of $6 billion, making it the third-highest-ranked cryptocurrency in the 

 (RWA) category, the area the platform specializes in. Everything seemed like smooth sailing for the token.

Then, just after 6 PM UTC, the price of the OM token suddenly began to free-fall, declining from nearly $6 to about $0.50 in the space of just two hours.

A project that started the day as one of the top players in the RWA field was now worth 90% less as the evening approached. OM's abrupt, sharp crash immediately caught the market's attention, with speculation of a 

However, MANTRA's CEO, John Patrick Mullin, immediately sprang into action for PR damage control on social media, reassuring the public that the team members weren’t dumping OM tokens at all. Instead, MANTRA's founder and CEO alleged that deliberate actions of some 

 (CEXs) had caused the catastrophic plunge.

As of our coverage date of Apr 23, 2025, this is a developing story. In this article, we’ll establish what actually happened, who's involved and what awaits the OM token in the foreseeable future.

 decentralized network dedicated to RWA tokenization and utilization in compliance with real-world regulatory requirements.

 It features high scalability and low transaction fees. The project is one of the earliest initiatives dedicated to RWA use via blockchain technology. Originally, MANTRA debuted as a 

 (ETH) in August 2020. In October 2024, the project migrated to its own dedicated Layer 1 platform, the MANTRA Chain. The MANTRA blockchain is based on the Cosmos SDK framework, and is part of the wider 

The MANTRA ecosystem's main products include MANTRA DEX, a 

 (DEX); a digital identity (DID) management tool; a compliant token development and management solution; and a comprehensive compliance and permissioning system. MANTRA has also partnered with global powerhouses like Google Cloud, and with DAMAC Properties, one of Dubai's most prominent developers, to propel innovative solutions for 

Starting in late 2024, right after its own dedicated mainnet launch, MANTRA had become a significant player in the RWA corner of 

 (DeFi). By late February 2025, the platform’s native OM token had climbed to a value of nearly $9, with its market cap peaking at around $8.2 billion. Before the fateful events of Apr 13, 2025, OM was the third-highest-capped crypto in the RWA category, trading at $6.27, with a market cap of slightly over $6 billion, according to the CoinGecko portal.

In the evening hours (UTC time) of Apr 13, 2025, OM began to lose its value precipitously, dive-bombing from over $6 to about $0.52 in the space of two hours. The token’s market cap fell to slightly under half a billion dollars — a loss of more than 90%.

CEO John Mullin was quickly online, reassuring the crypto community that no team member had sold their OM holdings, and that this wasn’t a case of the bad ol’ rug pull. Instead, Mullin alluded that after OM tokens were moved to two leading CEXs (Binance and OKX) to use as collateral, the exchanges initiated a cascade of 

 of positions backed by the token. Both exchanges refuted the allegations, and connected OM’s price collapse to its recent unusually high price 

, and significant tokenomics changes made to OM in October 2024 that greatly undermined its value.

As a chain of liquidations took place, the token’s price started to plummet, causing significant panic that quickly led to further price drops. The situation only stabilized closer to the end of the day, with OM’s price remaining under $1. As of Apr 23, it’s trading at $0.5543 — a far cry from its rate of over $6 just two weeks ago.

After investigating, crypto analytics firm Lookonchain concluded that 17 wallets had deposited 43.6 million OM tokens (4.5% of the token's circulating supply) into the implicated exchanges. Two of these wallets are believed to belong to Laser Digital, one of MANTRA's investors. Another investor in the project, Shorooq Partners, is also suspected to be among the 17 wallets. Both Shorooq and Laser Digital have denied the allegations.

Although the price plunge was immediately compared to the 2022 collapse of the 

 (LUNA) blockchain, many analysts point out that the two crashes are fundamentally different. Terra's crash resulted from structural abnormalities in the 

 regulating UST, the project's stablecoin. In contrast, OM's fiasco is suspected to be the direct result of market-driven manipulation by 

, and possibly exchanges. No security breach, disruption to services or data, or other adverse structural events have occurred on the platform.

While this development is unprecedented for the project, MANTRA has been embroiled in other controversies throughout its history. One of these was its 

, first announced in August 2024 and then delayed multiple times. Around 50% of the wallets believed to be bots were cut off from the airdrop list. However, many considered the bot-culling process to have been conducted without much proof.

There have also been reports of vote rigging in the project's governance system in a bid to obscure MANTRA’s centralized model of profit allocation. Additionally, some analysts have accused the project of "forced bridging" to manipulate the market price. Platform users had to migrate their Ethereum-based OM tokens to MANTRA's native OM tokens via 

, which would increase gas fees and allow the project team to control the token's circulation pace.

How is MANTRA (OM) headed toward recovery?

MANTRA’s CEO rapidly reassured users that the team is now working hard to jump-start the token’s recovery. On Apr 14, 2025, Mullin unveiled plans to initiate a buyback scheme, along with the intent to burn all OM tokens held by the project team. The team's supply totals 300 million tokens, representing about 17% of the total supply.

He also denied factually incorrect assertions circulating online that the team effectively controls 90% of OM's supply. Mullin further assured the public that no large-scale selling events by investors have occurred.

As OM’s value has stayed firmly under $1, it remains to be seen how these PR efforts — as well as the planned buyback and burn — will affect the token’s future.

 as a swap pair with USDT, or on the Derivatives market as the 

Naturally, given the ongoing situation with the OM token, buying OM is at your own discretion, as right now the token is truly for the adventurous and brave at heart.

As of Apr 23, 2025, the OM token is trading at $0.5543, 93.8% lower than its ATH of $8.99 on Feb 23, 2025, and 3,138.8% higher than its ATL of $0.01726 on Oct 12, 2023.

Curiously, most crypto price prediction portals are optimistic about the OM token's long-term prospects. DigitalCoinPrice 

 of $1.81 in 2027 and $2.82 in 2030, whilePricePrediction 

It's hard to verify all the allegations flying around regarding the involvement of exchanges and key investors in the MANTRA OM incident. What matters at this stage is that the project team has been quick and proactive in injecting transparency and clarity into the situation.

The free fall in the token's price seems to be over by now. In fact, OM’s decline was over within hours of the incident. Moreover, unlike Terra's LUNA and UST coins, OM hasn't become worthless. All these factors point to potential stabilization and recovery ahead. The question now is: Will the pace and magnitude of the recovery be enough to save the project in the long term? At this early stage after the collapse, few people could answer the question with confidence. We'll eagerly await the developments over the next few weeks to see if MANTRA finds its way out of the woods. 

Intermediate

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MANTRA (OM): Understanding its wild ride and road to recovery

In this article, we explore WalletConnect's features, its native token (WCT) and how you can trade WCT on Bybit Spot and Futures.​

WalletConnect is an open source bridging protocol that facilitates secure connections between digital wallets and 

 (DApps). With over 38 million unique active wallets and 57,000 supported apps, it’s getting noticed by the crypto community. In this article, we explore WalletConnect's features, its native token (WCT) and how you can trade WCT on Bybit.​

 protocol that allows users to connect their mobile wallets to DApps via QR code. This eliminates the need for browser extensions, and enhances security by keeping 

The protocol supports a wide range of wallets and DApps, making it a versatile tool for users navigating DeFi and web3.

 is essentially a decentralized infrastructure that facilitates a uniformed way for users to easily connect their crypto wallets with thousands of DApps. It operates through a network of

 that relay messages, ensuring reliable and secure connections. The network's design emphasizes scalability and resilience, catering to the growing demands of DeFi. 

When a user initiates a connection between their wallet and a DApp, WalletConnect establishes a secure session through a relay server that enables encrypted communication, allowing users to interact with DApps directly from their wallets. 

The network's architecture ensures that messages are transmitted efficiently, maintaining a seamless user experience.​

The WalletConnect ecosystem comprises various stakeholders, including node operators, wallet providers and DApp developers. Node operators play a crucial role by maintaining the network's infrastructure and relaying messages. 

To incentivize participation, the network implements a rewards mechanism whereby node operators earn WCT tokens, based on their performance and contribution. Prominent organizations like Consensys, Ledger and Figment are among the network's node operators, underscoring its robustness and reliability.​

 is the native utility and governance token of the WalletConnect network. It has a total supply of 1 billion, 

Initially, WCT is nontransferable to ensure that tokens remain within the WalletConnect ecosystem, supporting its focus on network functionality and development. Based on discussions within the community, transfers will be enabled based on community consensus and future governance decisions.

Where to buy the WalletConnect token (WCT)

 on Bybit Spot, and as a Perpetual contract with up to 75x 

. Bybit provides a secure and user-friendly platform for buying and selling WCT, allowing users to participate in the WalletConnect ecosystem. 

How to trade the WalletConnect token (WCT) on Bybit

Bybit's platform ensures efficient execution and provides various tools to assist users in their trading journey with ease.​ 

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WalletConnect (WCT): Bridging web3 beyond wallets and DApps

Circle has launched the Circle Payments Network (CPN), a global payment solution designed to streamline cross-border transactions using stablecoins like USDC and EURC for real-time settlement. 

The S&P 500 rose 2.51% as investor confidence improved following President Trump’s support for Fed Chair Powell and hints of easing U.S.-China trade tensions, despite tempered optimism and Tesla’s earnings miss. Gold rebounds toward $3,400 as the US Dollar weakens and investor caution lingers over US-China trade and Fed concerns. Technicals suggest a possible pullback, with focus shifting to upcoming S&P Global PMI data. The Coindesk Indices, which tracks the broader crypto market, rose 7.46%, with Bitcoin and Ether up 4.68% and 7.70%, respectively, in the past 24 hours. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is DEEP, up 122.1%, following the launch of DeepBook v3.1 on Sui, which unlocks permissionless pools, enhanced balance management, and cost-efficiency for DeFi.

DeepBook (DEEP), launched on July 12, 2023,  is Sui’s native liquidity layer, using a central limit order book to enable high-throughput, low-slippage, and low-fee trading. 

, introduces several key upgrades: permissionless pools, revamped fee mechanics, and enhanced balance management. These changes make DeepBook more accessible, composable, and cost-efficient for DeFi users. Permissionless pools allow anyone to create custom trading pairs, while the enhanced balance manager supports third-party liquidations and improves protocol stability and user experience.

Check out the latest prices, charts, and data of 

, a global payment solution designed to streamline cross-border transactions using stablecoins like USDC and EURC for real-time settlement. CPN offers faster, programmable, secure, and always-available money movement for financial institutions. It supports services like invoice payments, remittances, treasury services, and payroll payouts. Over 20 design partners, including dLocal, WorldRemit, and BVNK, are contributing to building a more efficient global payments infrastructure.

Yesterday, Bitcoin spot ETFs saw $719.2M in total inflows, with $654.1M from non-GBTC funds and $65.1M from GBTC.

 its incentivized testnet, allowing users to earn $SO tokens by testing its cross-chain lending platform. By supplying and borrowing assets across chains and completing quests, participants earn "Seeds," which will convert to $SO at TGE. Powered by LayerZero, Soul aims to unify liquidity across blockchains.

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Circle launches Circle Payments Network for faster, secure global transactions using stablecoins

VeChain (VET) is a blockchain platform focused on sustainability, using eco-friendly technology to support green initiatives across industries and drive a more sustainable future.

Sustainability is now the name of the game across many industries. The blockchain industry is one of them, with several projects aiming to reduce the energy impact of their operations or support green causes in other ways. However, on closer inspection, sustainability has received much less attention in the world of blockchain technology than many people may assume. Indeed, the industry's two leading data portals, CoinGecko and CoinMarketCap, have no "Sustainability" or similar category, despite coming up with hundreds of other classifications.

Some smaller-cap projects outside of the top 100, such as 

 (IOTA), do focus on supporting environmental causes. But in the entire list of top 100 cryptocurrencies by market cap, only one project can confidently be described as having sustainability as its key pillar — 

With a market cap of $2 billion (as of the time of writing on Apr 22, 2025), VeChain stands head and shoulders above any other crypto project in the sustainability niche. The project has been fully operational since 2018, and is among the oldest environmentally focused blockchain initiatives. In short, if we talk about sustainability and blockchain, it would be disingenuous not to mention VeChain and its 

Having championed green blockchain causes since 2018, VeChain announced a significant upgrade initiative in late 2024 to be rolled out in stages during 2025. Called Renaissance, it’s envisioned to further solidify VeChain's position as the leader of eco-friendly blockchain use and introduce a host of technical improvements. In fact, 2025 is the year of the most fundamental upgrade to this notable industry player in its entire history on the market, so it's precisely the time to revisit this project in our coverage.

VeChain (VET) is a decentralized project designed to support sustainability-focused blockchain use cases across various industry verticals.

 The company was first conceptualized and founded as a blockchain project in 2015 by Chinese technology professional Sunny Lu. It launched its Layer 1 network, VeChainThor (VTHO), in mid-2018, becoming one of the first decentralized initiatives to support eco-friendly applications on-chain. The VeChainThor network features low transaction fees and high levels of scalability.

For years, the VeChain blockchain has remained probably the leading decentralized platform in the niche of sustainability. As of April 2025, it retains the leadership position, and is ranked 56th among all cryptocurrencies, with a market cap of $2 billion.

VeChain's sustainable blockchain technology

Many blockchains claiming to support environmental causes typically use the 

, which is indeed much more energy-efficient than the power-hungry 

 (BTC). By using PoS, these blockchains have boldly announced that their energy use is much lower than Bitcoin's. While this is true, these platforms are essentially general-purpose networks that don't specifically design their operations with any particular sustainability use case in mind.

Instead of these two typical consensus mechanisms, the VeChainThor blockchain uses 

 (PoA), touted to be even more energy-efficient than the standard PoS employed by 

 chains. In a typical PoA consensus, a smaller number of validators with "authority" — i.e., a history of reliable behavior on the network — are entrusted to process blocks. This is in contrast to PoS, whereby many validators take part in the staking contest to outperform each other in terms of token holdings. They then receive the right to validate the next block, and have to constantly align their consensus process with other 

As a result, PoS is usually less energy-efficient than PoA. VeChain's PoA model elegantly combines efficient processing, minimal energy use and high levels of enterprise-grade security.

The VeChainThor blockchain network's processing engine also features compatibility with the 

 (EVM), making cross-chain communication with the Ethereum world much easier for VeChain developers and 

PoA block validation isn’t the only sustainability-minded feature of VeChain. Unlike many other popular chains, VeChain also directly enables sustainability use cases, primarily by utilizing its tamperproof and transparent data-tracking mechanism. Thus, enterprises across different industries can track and reliably verify the origin of goods and their sustainability status for eco-friendly supply chain management. For instance, supermarket chains can use the platform to track and verify the carbon footprint of the produce they source; logistics companies can calculate the overall emissions generated along their supply chains; and fashion brands can track sustainable sourcing of materials used for their product lines.

Besides its own blockchain, the project also offers a blockchain-as-a-service (BaaS) platform, VeChain ToolChain, to help businesses integrate VeChain's technology into their business processes via standardized smart contract services.

To further position itself as a champion of sustainability, VeChain launched 

 represents an on-chain ecosystem of DApps that reward VeChain users for completing various eco-friendly tasks, such as using reusable coffee cups, shopping for organic products, picking litter off streets and more. VeBetterDAO is the project’s foray into the individual consumer side of environmentalism, which complements the VeChain platform’s long-standing sustainability features for the enterprise world.

In late 2024, VeChain first announced its planned multi-stage upgrade, Renaissance, to make the platform even more efficient. Its changes are envisioned to take place gradually throughout 2025, and possibly beyond. The Renaissance upgrade touches many parts of the platform, with three key areas involved — a new VeChain staking and node model, technical updates and changes to the dual token mechanism. We'll cover the first two areas below, and the changes to VeChain’s tokenomics in the next section.

VeChain’s PoA block validation model uses a group of 101 trusted Authority Masternodes (AMs) who will fully transition to Validators under the new Renaissance model by December 2025. Each Authority Masternode is approved by the VeChain Foundation. These nodes are responsible for generating transaction blocks. You’ll need to 

 at least 25 million VET to participate in block production, which occurs in fixed 14-day cycles.

Under the platform’s pre-Renaissance model, there are two more types of specialized nodes — Economic and X-Nodes — who stake their tokens to a selected AM/Validator and participate in 

 on the platform. After the Renaissance upgrade is fully rolled out, Economic nodes and X-Nodes will be replaced by a tiered system of Delegator nodes.

Delegators will need to stake a certain amount of VET tokens to mint Delegator 

, which will entitle them to different grades of staking reward multipliers. The more you stake, the higher grade of NFT you receive, and the higher your staking rewards will be. When blocks are produced, AMs/Validators will receive 30% of the total block reward, with the remaining 70% going to holders of the Delegator NFTs.

The image below shows the new Delegator NFT–tiered model, with minimum VET staking requirements and reward multipliers.

While the VeChainThor network is EVM-compatible, there are still differences between its technical parameters and the standard EVM used by Ethereum. For this reason, the Renaissance upgrade aims to reach full EVM compatibility, including implementing the JSON-RPC (

remote procedure call) extensively employed within the Ethereum blockchain.

As part of the Renaissance upgrade, the project will also introduce a new set of tools to achieve more seamless cross-chain capabilities. This will involve integrating new 

The VeChain token model has always been based on two cryptocurrencies: VET and VTHO. VET is the 

 that acts as the main means of value storage and transfer on the platform, while VTHO is used to pay for gas. Now, the Renaissance upgrade also changes the way the dual-token mechanism operates.

Before the upgrade fully kicks in, VTHO is still generated by simply holding VET. After the Renaissance, only staked VET will generate new VTHO for the holder. This should better align VTHO with the active participation of users on the platform. VTHO's inflation rate will also be cut by over 70%, as its issuance will be aligned to a new emission model that considers the total amount of VET staked on the platform.

To further reduce the inflationary properties of VTHO, 100% of all base transaction fees on the network, which are all paid with VTHO, will be 

VET is the platform’s value transfer and storage token. It’s also used for governance and access to various features and apps on the network. VET is a supply-capped token with a max supply of just over 86.7 billion. These properties will not change following the Renaissance upgrade.

VTHO, which is used to pay for gas fees on VeChainThor, is an inflationary token with an uncapped supply. It currently has a total supply of almost 88,7 billion. As noted above, after Renaissance, VTHO will be generated via staking only, and will feature a burn mechanism to reduce its inflation rate.

 as a swap pair with USDT, and on the Derivatives market as the 

In addition, you can take advantage of Bybit’s event dedicated to the VET token to grab a share of a 

. New users can earn VET rewards by accumulating a deposit volume of at least 5,000 VET, or by depositing at least 100 USDT and trading 100 USDT worth of VET via their first Spot trade using their Bybit account. Meanwhile, existing users can also qualify for rewards by trading at least 500 USDT worth of VET on the Bybit Spot market. The event runs through Apr 28, 2025, 9AM UTC.

As of Apr 23, 2025, the VET token is trading at $0.02576, which is 90.8% lower than its ATH of $0.281 on Apr 19, 2021, and 1,243.2% higher than its ATL of $0.001917 on Mar 13, 2020.

Long-term price forecasts for VET are mostly bullish. DigitalCoinPrice 

 of $0.088 in 2027 and $0.14 in 2030, while PricePrediction 

In the long term, VET might even rise to $1, at least according to PricePrediction’s forecast. Its portal is highly optimistic, estimating that VET will hit the $1 mark in 2034.

You might consider investing in the VeChain token VET based on the following:

When Sunny Lu created VeChain in 2015, his vision focused on sustainability issues. VeChain's work in this area has led to the creation of the first decentralized network truly dedicated to making a tangible environmental impact. The entire VeChain ecosystem — including the VeChainThor blockchain platform, VeBetterDAO and VeChain Toolchain — continues to serve as a significant enabler of sustainable technology in the business world.

Now, with the Renaissance upgrade being rolled out for the duration of 2025, VeChain aims to solidify its leadership in this sphere. With the Renaissance upon us, it's hard to see any blockchain platform that could challenge VeChain in the area of sustainability anytime soon.

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What is VeChain (VET): Building a sustainable future for all

Trading

Crypto liquidation describes the forced closing of a trader's trading position due to the partial or total loss of their initial margin. Learn how it happens & strategies to avoid it.

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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!

Liquidation refers to the process of selling off crypto assets for cash to minimize losses, especially in the event of a market crash.

However, in the crypto space, the term liquidation is mainly used to describe the forced closing of a trader’s position due to the partial or total loss of the trader’s initial margin. This happens when they cannot meet the margin requirements for their leveraged position — i.e., they have insufficient funds to keep the trade open. Margin requirements are often underfunded when there’s a sudden drop in the underlying asset’s price.

When this happens, the exchange will automatically close out the position, resulting in a loss of funds for the investor. The severity of this loss will depend on the initial margin in place and how much the price drops. In some cases, it can lead to a total investment loss.

Liquidations can be categorized into partial and total liquidation. For example: 

 Liquidation that closes a position partially early on to reduce the position and leverage used by a trader.

 Closing a position nearly all of the initial margin of a trader has been used.

Liquidation can happen in both futures and spot trading. Though traders should be aware that when buying a contract, the price is derived from the asset instead of the asset itself. That translates to the fluctuation of the profit and loss when it’s converted back to the current asset’s price. 

Crypto margin trading is the process of borrowing money from crypto exchange to trade a higher volume of assets. This can provide the trader with increased buying power (or “leverage”) and the potential for greater profits. In other words, leverage refers to borrowing funds to enter a larger position than the own funds permit. However, it also carries more risk, as leveraged positions can be liquidated quickly if the market moves against you.

, the exchange will require you to put up a specified amount of crypto or fiat currency (also known as the “initial margin”) as collateral. These funds help to insure the lender against loss if the trade goes south. While maintenance margin is referred to as the minimum margin required to keep a position open.

Leverage is calculated using the amount of funds you can borrow from an exchange relative to your initial margin. Let’s take a simple example. If you start with an initial margin of $1,000 and 10x leverage, that means you’ve borrowed $9,000 to increase your trading position from $1,000 to $10,000.

The degree of leverage also determines the potential of a trade to make or lose money. Using the example of 10x leverage above, if your asset’s price rises by 5%, you’ve gained $500 (or 5% of $10,000) from your trading position. That is, with just a 5% price increase, you’ve netted a profit of 50% of your initial $1,000 margin. Sounds lucrative, right? 

But cryptocurrencies are notoriously volatile, and the price of your asset could tumble at a moment’s notice. So continuing with the example above, with a 5% drop in your asset’s price, you’ve lost $500, or 50% of your initial margin, which translates to a 50% loss. 

The objective of trading is to make a profit. The formula for calculating how much you stand to make or lose when using leverage is simple:

Initial margin × (% price movement × leverage) = profit or loss

One important note about crypto margin trading: When positions are liquidated, they’re always closed at the current market price. Your losses are magnified by the size of the leveraged position. In other words, if the trader loses $1,000 out of the $10,000 open position, the trader lost his entire initial margin. So it’s critical to be aware of the risks involved before borrowing any money to trade cryptocurrencies. 

Liquidation happens when an exchange or brokerage closes out a trader’s position because it can no longer meet margin requirements. Margin is the percentage of the total trade value that must be deposited with the broker to open and maintain a position.

When a trader’s margin account falls below a level previously agreed upon with the exchange, positions will automatically start liquidating. When your leveraged position reaches the liquidation threshold, you’ll face a “margin call,” which means you need to put up more margin. Liquidation tends to happen more often on futures contracts, where traders use higher amounts of leverage.

At that point, there are two options: Either you can add funds to your margin to bring your leverage back up above the leverage requirement, or the broker will automatically liquidate your position.

Continuing with our example of a $1,000 initial margin, let’s say you entered a trade with 10x leverage, which means your leveraged position is now $10,000 — that is, $1,000 of your own money and $9,000 which you’ve borrowed from the exchange.

Let’s say your BTC slipped by 10%. Your position now is worth $9,000. Should the dip continue, and the position’s losses increase, it would be applied to the borrowed funds. To avoid losses to the borrowed capital, the exchange would then liquidate your position to protect the money lent to you. Your position is closed — and with it, your initial capital of $1,000 is lost.

That’s not all. Exchanges will typically charge you a liquidation fee. The idea is to encourage traders to close their positions before they’re liquidated automatically.

A critical point to know is that leverage cuts both ways: Higher leverage will make you more money when the trade goes well, but only require a slight negative price movement to trigger a liquidation event. For instance, a trade position with 50x leverage will only take a price slide of 2% to initiate a liquidation.

However, there are other instances where exchanges like 

 that is fixed at 0.5% of the bankruptcy price instead of the entry price. That also means, a trader’s position will not be partially liquidated but will only be liquidated if the initial margin has 0.5% left. Still, if you must use leverage, you may want to limit yourself to an amount you can manage. 

 is the point at which your leveraged positions are automatically closed out. A few factors that affect this threshold include leverage used, maintenance margin rate, cryptocurrency price, and the remaining account balance. Exchanges will calculate the liquidation price for you, which may be an average taken from several major exchanges.

When the price of your cryptocurrency crosses the liquidation price threshold, it triggers the liquidation process. Cryptocurrency prices are constantly changing, so it’s important to stay on top of the latest news and make sure your positions are still making a profit. Otherwise, you may find yourself automatically liquidated at a loss.

A trader may need to liquidate their Bitcoin to cover a short position, or to meet other financial obligations. When this happens, the trader will usually sell their Bitcoin at the current market price, regardless of whether it’s above or below the original purchase price. However, in some cases, a trader may be forced to sell their Bitcoin at a price below the market rate. This may end up being the liquidation price, and it’s usually determined by the exchange on which the Bitcoin is being sold.

In early January, when Bitcoin fell below 43k, over 

 were liquidated, resulting in large losses for long crypto traders. This happened because of a partial or total loss of initial margin for traders.

It’s important to note that the liquidation price can change at any time, depending on the current market conditions. So if you’re thinking about selling your Bitcoin, it’s always a good idea to check the latest liquidation price before making a final decision. By doing this, you can make sure that you’re getting the best possible deal.

Forced Liquidation vs. Liquidation: Differences

The term “liquidation” simply means converting assets to cash. Forced liquidation in crypto trading refers to an involuntary conversion of crypto assets into cash or cash equivalents (such as stablecoins). Forced liquidation occurs when a trader fails to meet the margin requirement set for a leveraged position. When this condition is met, the exchange sells the trader’s assets automatically to cover their positions.

The main difference between liquidation and forced liquidation is that in a forced liquidation, the

trader’s positions are closed automatically by a third party (like the exchange), while in a

regular or voluntary liquidation, the trader has to close them. A trader can decide to cash out a cryptocurrency trade for various reasons.

Another key difference is that in a forced liquidation, all positions are closed at the same time, while in voluntary liquidation, they can be closed gradually.

A forced liquidation protects traders from incurring any additional losses. However, it can also be a disadvantage, because all positions are closed at the same time, which can lead to missed opportunities. A regular liquidation, on the other hand, gives traders more control over their positions as they can close them gradually. This also means, however, that they’re more exposed to losses if the market moves against them.

While there’s always a chance you’ll lose money on a trade, employing smart trading strategies such as using lower leverage and monitoring margins can help a trader avoid liquidation. Crypto exchanges also offer insurance funds as a way of minimizing trading losses.

 is a reserve pool of funds that acts as a protective mechanism against excessive loss. It is used to cover the contract loss. So, when a trader’s position has been liquidated at a price better than the bankruptcy price (that is, the price at which a trader’s losses equals their initial margin), any gains go to the insurance fund.

On the other hand, if the liquidation price is less than the bankruptcy price, the position’s loss will have exceeded the trader’s initial margin. The insurance fund will then cover this deficit (or negative equity).

For example, John and Alice opened different BTC long positions with a bankruptcy price of $40,000 and $39,500 respectively. They both have a liquidation price of $40,200, so when they get liquidated, John is liquidated at $40,000 thus taking away from his insurance fund while Alice is liquidated at $39,500 with the add-on of the insurance funds based on the last traded price of $39,800.

Insurance funds are safety nets that protect bankrupt traders from unfavorable losses. However, using liquidation exit strategies can prevent this risk in the first place. The purpose of an exit plan is to minimize the amount of money lost. 

Examples of liquidation exit strategies include using limit, trailing stop-loss or stop-loss orders to close out positions before liquidation occurs. 

 means the trader chooses to close the position with a market order once the last traded price reaches a pre-determined price. Stop-loss orders act as a safety net to limit the potential loss that crosses the entry price. 

This refers to setting a stop-loss order following the last traded price at a pre-set price’s distance and direction. So when the last traded price reaches the peak and only moves in one direction, it’ll then trigger the trailing stop. Thus limiting the losses and increasing unrealized gains when the market price moves in your favor.

Reducing leverage, even slowly, is also a way to combat liquidation. However, the first step is keeping track of liquidation prices, and of how close your positions are to not being able to cover margin. 

Before jumping into crypto trading, be sure you understand what liquidation is and how to avoid it. Crypto liquidation occurs when an investor cannot meet the margin requirement for their leveraged position. Traders increase the funds they can trade with by borrowing from an exchange.

While leveraging or borrowing funds to increase trade positions can multiply potential gains, it’s a highly risky move, and can equally amplify your losses. Nevertheless, you can avoid liquidation by keeping an eye on your margin, leveraging reasonably, and using trading tools such as stop-loss and limit orders.

What Is Crypto Liquidation & How Do I Avoid It?

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