Liquidation
Definition
Liquidation is the forced closure of a leveraged position when the market moves against the trader and their margin falls below the maintenance requirement. The exchange automatically sells the position to prevent further losses. Liquidation cascades — when many positions get liquidated simultaneously — can amplify market crashes. Tracking liquidation data (via Coinglass or similar) helps identify market tops and bottoms.
Why Does This Matter?
Understanding Liquidation is essential for anyone investing in cryptocurrencies or working with blockchain technology. This concept directly influences how projects are valued, how markets behave, and what risks and opportunities exist for investors.
How Does CryptoValue Use This?
At CryptoValue, fundamental concepts like Liquidation feed into our proprietary Value Score — a rating from 0 to 100 based on 10 on-chain and market metrics. Our goal is to help you identify undervalued and overvalued coins, rather than just looking at price.