❤️📉 Why Do Crypto Prices Drop So Quickly? Do you want to know why you are seeing everything in red?❤️❤️

Hello everyone! 👋 If you have ever seen the price of a cryptocurrency plummet in a matter of minutes, it is very likely that you have witnessed the effect of a liquidation. This is one of the most powerful and often misunderstood phenomena in the market.

What is a Liquidation?

In simple terms, liquidation occurs when a trader who is trading with leverage (borrowed money) does not have enough capital to cover their losses. To protect the lender, the platform automatically closes the trader's position.

* Example: If you use 10x leverage and the price of the asset moves 10% against you, you lose 100% of your capital. At that moment, the platform liquidates you, selling your position to recover the borrowed money.

The "Cascade" Effect and Price Drops

A liquidation rarely occurs in isolation. When a large number of leveraged positions are liquidated at the same time, a domino effect occurs, known as a cascade of liquidations.

* The massive selling caused by these liquidations pushes the price of the asset down.

* This price drop causes other leveraged positions, which were about to be liquidated, to also be liquidated.

* More liquidations mean more sales, which accelerates the price drop and creates panic in the market.

It is this "snowball" effect that can turn a small price correction into a drastic and rapid drop, leaving unsuspecting investors with large losses.

Remember: This phenomenon is the main reason why beginners are warned about the dangers of leverage. Liquidation is not just a threat to the leveraged trader, but it is also a catalyst for the volatility of the entire market.

What do you think? Did you know the power this phenomenon has?

I currently invest in #PROVE🔥🤑😍💚🚀🔥