Forced sale of a borrower’s collateral when its value falls below a protocol’s required loan-to-value ratio. Common in DeFi lending (Aave, Compound) and leveraged trading (Hyperliquid, dYdX). Liquidations cascade in drawdowns — one liquidation pushes price down, triggering more liquidations. Use leverage cautiously, especially in volatile markets.
Liquidation
Forced sale of a borrower's collateral when its value falls below a protocol's required loan-to-value ratio. Common in DeFi lending (Aave, Compound) and leveraged trading (Hyperliquid, dYdX). Liquidations cascade in drawdowns — one liquidation pushes price down, triggering more liquidations. Use leverage cautiously, especially in volatile markets.
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