Unveiling the Crucial Truth: Understanding Crypto Liquidations in Perpetual Futures

Key Points

1. Crypto perpetual futures are popular due to their leverage features, but they also increase the risk of liquidation if the market moves against a trader's position.

2. Liquidation occurs when a trader's position falls below a certain threshold, leading to an automated sell-off to cover losses, with higher leverage increasing the risk.

3. A 24-hour snapshot showed significant liquidations in major assets like Ethereum (ETH), Bitcoin (BTC), and Solana (SOL), primarily from long positions, indicating a market downturn.

4. Mass liquidations can exacerbate price declines, increase market fear, and contribute to bearish sentiment due to cascading selling pressure.

5. Traders can avoid liquidations by managing leverage, setting stop-loss orders, and prioritizing capital preservation over quick gains.