The market’s leverage was also excessive, which helped cause the collapse. Most traders used borrowed money to amplify their positions, leaving them vulnerable to price swings. Once the price of Bitcoin and Ethereum fell below critical values, automatic liquidations were triggered, which compelled collateral auctioning in all major exchanges.
The situation was exacerbated by cross-margin trading of a pool of funds that held several trades. With the liquidation of positions, altcoins faced more intense selling pressure due to thinner order books. Small sell orders caused sharp price drops, triggering a domino effect that led to a market-wide decline.
the conditions a chain reaction, as instigated by over-leveraged traders. According to him, the crash was terrible, but other severe liquidation incidents occurred in 2020 and 2022, which were followed by market recoveries. Many traders are watching to see if this correction will pave the way for another rally after volatility levels have been settled.
