Why Do Crypto Markets Experience Liquidation Cascades?

A sharp crypto price move can sometimes trigger a chain reaction that pushes prices even further. Highly leveraged traders may be forced to close their positions when the market moves against them, creating additional buying or selling pressure. Those liquidations can then trigger more liquidations, producing what traders often call a liquidation cascade. This is one reason crypto markets can move much faster than investors expect, particularly when leverage has built up during a strong rally. Understanding liquidations can therefore help explain why a relatively small initial move sometimes turns into a dramatic market swing. Does excessive leverage pose one of the biggest risks to crypto market stability?