How does crypto liquidation work?

3 answers

• Dec 28, 2021 · 3 years ago
  Crypto liquidation is the process of converting a trader's assets into cash to cover their losses or meet margin requirements. When a trader's account falls below a certain threshold, the exchange automatically sells their assets at the prevailing market price to settle their obligations. This helps to protect the exchange and other traders from potential losses. It's important for traders to understand the liquidation process and manage their risk accordingly.
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• Dec 28, 2021 · 3 years ago
  Crypto liquidation is like a safety net for traders. When a trader's account balance reaches a certain level, the exchange will automatically sell their assets to cover any losses. This ensures that traders don't end up owing the exchange money and helps maintain the stability of the market. It's a necessary mechanism in the world of crypto trading.
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• Dec 28, 2021 · 3 years ago
  In the case of BYDFi, crypto liquidation works slightly differently. When a trader's account falls below the required margin, BYDFi will attempt to liquidate the trader's positions to cover the losses. However, if there is not enough liquidity in the market, BYDFi may have to socialize the losses among its users. This means that all users may be affected by the liquidation event, and their funds may be used to cover the losses. It's important to be aware of this risk when trading on BYDFi.
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