Derivatives & Risk

How does a liquidation cascade work in leveraged markets?

A liquidation cascade is a chain reaction in which forced closures of leveraged positions push prices further in one direction, triggering still more liquidations. When a leveraged trade falls below its maintenance margin, the exchange closes it automatically by selling into the market. That selling drives the price lower, breaching the margin level of other traders and repeating the loop. Cascades explain why leveraged crypto markets can move violently in minutes. Understanding how leverage amplifies downside is one reason a research-led, unleveraged approach to allocation can be steadier. See how Qatobit frames disciplined exposure.

Crypto investments are subject to market risk and volatility. Past performance is not indicative of future returns. This is general information, not investment advice — consider your own circumstances or consult a qualified adviser before investing.