Liquidation means your position is forcibly closed, and you lose all your capital. In Bitcoin and crypto markets, this usually happens in leveraged trading. For example, if you use 10x leverage to buy BTC and the price drops by 10%, your margin will be wiped out, triggering an automatic sell-off by the system.

Example:
John invests  $10,000with10xleverage(holdinga$10,000with10xleverage(holdinga100,000 position). If BTC price drops 10%, the position value falls to  $90,000,equalingJohn\text{’}sinitialcapital.Thesystemliquidateshisposition,leavinghimwith$90,000,equalingJohn’sinitialcapital.Thesystemliquidateshisposition,leavinghimwith0.

Why Does Liquidation Happen?

1. Excessive Leverage: Higher leverage magnifies both profits and risks. A 5% price swing can trigger liquidation at 10x leverage.

2. Market Volatility: BTC can surge or crash within minutes. On April 23, 2025, BTC surged past $94k, causing 160k liquidations.

3. Policy Shocks: Trump’s push to include BTC in U.S. reserves caused price swings, leading to 100k liquidations.

4. No Stop-Loss Strategy: Many hold losing positions, hoping for a rebound.

Real Cases: The Horror of Liquidation

• April 29, 2025: BTC hit  $95k,liquidating110ktraderswith$95k,liquidating110ktraderswith275 million in losses, including a single $4.3M loss.

• December 2024: A BTC crash wiped out $1.7B from 570k traders daily.

• Futures Trading Risks: 90% of liquidations come from high-leverage contracts, especially on volatile coins like ETH.

  
  

What to Do After Liquidation?

1. Stop Trading Immediately: Avoid emotional decisions.

2. Check Margin Levels: Add funds or reduce positions if partially liquidated.

3. Learn Risk Tools:

• Stop-Loss Orders: Automatically sell at a preset price (e.g., "Sell if BTC drops below $88k").

• Diversify: Allocate funds across BTC, ETH, and stablecoins.

4. Lower Leverage: Start with ≤3x leverage for beginners.

5. Review Mistakes: Document causes like "over-leveraging" or "ignoring regulations".

 How to Avoid Liquidation?

Rule 1: Only invest disposable income; never borrow for trading.

Rule 2: Monitor market sentiment tools like Liquidation Heatmaps (showing high-risk price zones).

Rule 3: Track policies (e.g., U.S. states legalizing BTC reserves).

Conclusion

Liquidation is the harshest lesson in crypto, teaching market respect. Remember: High leverage = High risk. Survival comes first. Newbies should start with spot trading and only explore futures after mastering market cycles. Long-term BTC holders ultimately thrive through bull and bear markets.