The Value of Compulsory Liquidation of 24-Hour Cryptocurrency Perpetual Futures Contract

The Value of Compulsory Liquidation of 24-Hour Cryptocurrency Perpetual Futures Contract

Compulsory liquidation is a mechanism in the cryptocurrency market that helps to manage risk and prevent excessive losses. In the case of 24-hour cryptocurrency perpetual futures contracts, compulsory liquidation occurs when the trader's margin falls below a certain threshold. This can happen for a variety of reasons, such as a sharp drop in the price of the underlying asset, a sudden increase in volatility, or a trader's poor trading decisions. When compulsory liquidation occurs, the trader's position is automatically closed, and any losses are realized. This can be a painful experience for traders, but it is essential to remember that compulsory liquidation is in place to protect the trader from even greater losses. Here are some examples of how compulsory liquidation can be used to manage risk in the cryptocurrency market: BTC liquidation amount: $49.6 million (long $5.77 million, short $43.83 million), liquidation ratio: 88.36% short. ETH liquidation amount: $21.86 million (long $4.25 million, short $17.61 million), liquidation ratio: 80.56% short. * SOL liquidation amount: $7.9 million (long $0.69 million, short $7.21 million), liquidation ratio: 91.25% short. As you can see from these examples, compulsory liquidation can have a significant impact on the cryptocurrency market. It is a powerful tool that can be used to manage risk and prevent excessive losses. However, it is important to remember that compulsory liquidation is not a guarantee against losses. Traders should always use sound risk management practices to protect their capital.