Is trading liquidation more common in volatile cryptocurrencies?

3 answers

• May 08, 2022 · 3 years ago
  Trading liquidation is more common in volatile cryptocurrencies because their prices can experience rapid and significant fluctuations. When the price of a volatile cryptocurrency drops sharply, traders who have borrowed funds to buy that cryptocurrency may not be able to repay their loans. As a result, their positions are forcibly closed by the exchange, leading to liquidation. This is less likely to happen with stable cryptocurrencies, as their prices tend to be more stable and predictable.
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• May 08, 2022 · 3 years ago
  In volatile cryptocurrencies, trading liquidation occurs more frequently due to the high level of price volatility. When the price of a cryptocurrency suddenly drops, it can trigger a cascade of liquidations as traders rush to sell their positions to limit their losses. This can create a downward spiral in the price, leading to further liquidations and exacerbating the volatility. Stable cryptocurrencies, on the other hand, are less prone to such rapid price movements, reducing the likelihood of trading liquidation.
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• May 08, 2022 · 3 years ago
  Trading liquidation is indeed more common in volatile cryptocurrencies. This is because when the price of a volatile cryptocurrency drops, it can trigger a margin call for traders who have borrowed funds to trade. If they fail to meet the margin requirements, their positions will be liquidated by the exchange. However, it's important to note that not all volatile cryptocurrencies are equally prone to trading liquidation. Factors such as liquidity, trading volume, and market depth also play a role in determining the likelihood of liquidation.
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