Historic liquidation of over $ 1.5 billion in 48 hours

What is liquidation?

Traditionally, liquidation involves the conversion of assets into cash. When an exchange forcefully terminates a leveraged trader’s position owing to a partial or complete loss of the trader’s initial margin, this means the liquidation in the cryptocurrency market. Let us emphasize that the initial margin relates to the money you deposited to begin a trading position. It is a type of security that functions as an insurance fund for the exchange if the transaction goes against the borrower. In other words, if a trader does not have enough funds to keep an open deal active, the exchange immediately terminates it.

How to avoid liquidation?

Some cryptocurrency exchanges that provide derivatives trading generate enormous profits by liquidating positions. Besides, traders may avoid this by following a few easy rules. Most traders are unaware of how derivatives exchanges mitigate the risks associated with supplying margin money. Even in the market situation, the common belief is that “winners get the losers’ money”. However, this is not as straightforward as it seems.

Conclusions

Bitcoin had the largest sell-offs in those two days with $ 511.2 million in losses, followed by Ethereum with $ 394.97 million. This accounts for more than half of all losses created. Their enormous trading volume and market capitalization are more significant in comparison to other cryptocurrencies. On the other hand, the derivatives market provides much bigger returns than the spot market. Producing a temporary commitment on the asset via bilateral contracts can diminish potential losses.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
BIT4YOU.io

BIT4YOU.io

bit4you is an european crypto exchange platform. We are facilitating the transition between crypto currencies and traditional currencies such as euro.