Liquidation is the forced closing of a leveraged position by the venue that financed it. When a trader borrows to hold more than their own capital would allow, the exchange holds collateral - margin - against the loan. If the position moves against the trader far enough that the collateral no longer covers the loss, the venue closes the position at market rather than waiting for it to recover. The trader does not choose the exit; the venue's risk engine does.
The arithmetic
Suppose a trader posts 1,000 USD of margin and opens a 10,000 USD long - ten times leverage. A 10% adverse move wipes out the whole 1,000 USD. In practice the venue acts before that, at a maintenance-margin threshold, closing the position while some collateral remains. Leverage is what sets the distance: at two times leverage the same 1,000 USD backs a 2,000 USD position, and it takes a 50% move to reach the same point.
Why liquidations arrive in clusters
A liquidation is a market order that executes regardless of price. Because many traders use similar leverage and enter near similar prices, their thresholds sit near each other - so one move can trigger a run of forced closes that pushes price into the next group of thresholds. That is a liquidation cascade: sellers who never decided to sell.
How MoonWire treats it
We report liquidation events as what sources said and what the data showed, never as a level to trade around. Two neighbouring measures usually carry more information than a liquidation headline: open interest, which says how much leveraged exposure exists, and the funding rate, which says which side is paying to hold it. Our 10 September Bitcoin read found price losing its seven-day floor while open interest expanded 2.12% - positioning building into a decline rather than being flushed out by it. More of this coverage sits under technical analysis.
What it is not
A liquidation is not a verdict on the asset, and a cascade is not a forecast. It is a mechanical consequence of leverage and collateral rules. A holder who borrowed nothing cannot be liquidated.