What is liquidation? The trading minute
Game over, market version. Liquidation is the moment when the platform closes your position on your behalf, without notice or possible discussion. Every trader using leverage has a liquidation price displayed somewhere on their screen. Many prefer not to look at it. Bad idea, because this number is the only boundary between a pressured position and an emptied account.
Liquidation, or the cost of leverage
Let’s start from the beginning. When you open a leveraged position, you only commit a fraction of the actual amount exposed, the margin (the collateral deposited as a guarantee). With 10x leverage, that means $1,000 of margin for $10,000 of exposure. If the market drops by about 10%, your loss consumes the entire guarantee. The platform will never take this risk on your behalf, so it automatically closes the position a little before that point, cashes in the margin, and leaves you to ponder. That’s liquidation.
The exact liquidation price depends on the leverage, the type of margin (isolated or cross), and the fees. The higher the leverage, the closer this threshold is to your entry price. At 50x, a 2% movement is enough. It’s like playing heads or tails.
And the danger is collective. A liquidation results in a market sell order, which pushes the price down, triggering further liquidations a notch lower, and so on. Traders call this a cascade. One domino, then a thousand.
October 10, 2025: The liquidation cascade that broke all records
On a Friday in October, an announcement of tariffs by Donald Trump against China, and the crypto market discovers how indebted it was. In a few hours, Bitcoin slips from $122,500 to $107,000, while some altcoins drop 40% to 80% in session before bouncing back. The tally, according to Coinglass data cited by CoinDesk on January 1, 2026: $19.13 billion in liquidated positions in 24 hours, with over 1.6 million traders ejected. About nine times the previous daily record.
The largest leverage purge in the history of the sector needed neither a hack nor a bankruptcy. A geopolitical phrase was enough. Those trading with reasonable leverage had a very bad day. Others didn’t see the end of the day.
Avoiding liquidation as a retail trader
The lesson boils down to three habits. Keep a modest leverage, one that allows the market to breathe without ejecting you at the first jolt. Always place a stop-loss before your liquidation price, because a chosen loss always costs less than an incurred loss. And only deposit in margin what you are willing to lose entirely, since that is precisely what disappears the day everything goes wrong.
Let’s broaden the scope. Perpetual contracts concentrate the bulk of volumes in the crypto market, far ahead of spot buying, so that a cascade like October 10 is less of an accident than a structural characteristic. That day, 1.6 million accounts thought they had time to react. The market gave them a few hours.
-- Price
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