Crypto liquidations explained: longs, shorts and cascades

Leverage lets a trader hold a position bigger than the money behind it. That money, the margin, is what absorbs the losses, and when the losses use it up the exchange doesn't wait for the trader: it closes the position itself. That's a liquidation. Watching them shows who is being forced out of a market, and when, as it happens. Each coin's perpetuals page shows them live, under Open interest & funding.

What is a liquidation?

Every leveraged position has a liquidation price, worked out from its size, its margin and the exchange's rules. When the market reaches it, the exchange takes the position over and closes it at the market. Most exchanges watch a mark price, built from several markets, rather than their own last trade, so one odd trade doesn't liquidate anyone.

• A long liquidated is sold. The price fell far enough to use up the long's margin, and the exchange sells the position.
• A short liquidated is bought back. The price rose far enough against the short, and the exchange buys to close it.

Leverage sets how close those prices sit to the market. At 10 times leverage, a move of a little under 10% against a position uses up its margin; at 50 times, a little under 2%. The more leverage a market carries, the shorter the fuse.

Why liquidations come in waves

A liquidation is a forced trade in the direction the price is already moving. A long liquidated is a sale into a falling market, which pushes the price lower, which reaches the next long's liquidation price, which is another sale. That chain is a cascade, and it's why liquidations arrive in clusters rather than one at a time.

The same happens upward with shorts: forced buys into a rising price, which is what drives a short squeeze.

How to watch them on the site

1. Open a coin's perpetuals page, such as Bitcoin's, and find Change in open interest under Open interest & funding.
2. Watch the strip under its lines. Each liquidation lands there at the moment it happened: ▼ for a long liquidated, ▲ for a short, bigger for a bigger one. The lines above show open interest changing at the same moments.
3. Hover a mark. The tooltip lists that moment's liquidations first: the side, the exchange, the size and its value.

Under the chart, Liquidations adds them up since you opened the page, longs and shorts, in money and how many, and lists the latest, newest first. Its notes say which exchanges' feeds the list comes from, which exchanges publish none a browser can read, and which send at most one a second for each market and side, so that a rush of them shows as fewer than there were.

What liquidations can tell you

• Who is being forced out. A run of ▼ means longs are being closed into a falling price; a run of ▲, shorts into a rising one.
• Whether a move is running on forced trades. A sharp move with a burst of liquidations under it is partly forced selling or buying, which can stop as suddenly as it started once the overstretched positions are gone.
• What open interest is doing. Liquidations close positions, so open interest falls as they come in. Open interest falling with no liquidations under it means traders are closing positions themselves (open interest explained).
• Where leverage was crowded. A big cluster on one exchange and not the others shows where traders had borrowed the most.

What the strip leaves out

• Only from when you opened the page. It's a live view, not a history.
• Not every exchange publishes them. Some keep their liquidations to themselves, and some publish only a sample: the notes under the list say which.
• Only the markets the page compares, the ones whose lines are on the chart.
• A liquidation's value is its size at the price it was closed at, which in a fast market can be well away from the price a moment before.

Not financial advice. Prices move while you read them.