When a trader gets liquidated, especially in futures trading, they lose their margin (the collateral they provided to open the position). Here’s where it goes:
Exchanges (like Binance, Bybit, etc.):
They automatically close the position to avoid further losses.
The liquidation fee is collected by the exchange.
Part of the lost funds may go to the insurance fund of the exchange (used to cover unfilled liquidation losses).
Counterparties (Other Traders):
For every liquidated long, someone with a short position profits.
So, opposite traders (with correct positions) benefit directly from the liquidation.
Who Benefits From Liquidations?
Short Sellers (when longs are liquidated).
Long Traders (when shorts are liquidated).
Exchanges earn from:
Liquidation fees
Increased trading volume
Funding fees in perpetual futures
Whales / Market Makers:
They can manipulate price to trigger liquidations and buy assets at a discount.
What Are the Benefits for Traders?
Even during liquidations, smart and strategic traders benefit by:
Buying the Dip:
When mass liquidations occur, price drops fast — giving great entry points.
Earning from Shorts:
Traders who shorted before the dump can profit big during the liquidation wave.
Learning Volatility Patterns:
Pro traders track liquidation data to predict price swings and market sentiment.
Volume Trading:
High volatility = high volume = more scalping & swing trading opportunities.
Summary:
Liquidations = Big Loss for some, Big Opportunity for others.
Stay informed, trade smart, use risk management, and don't let the market liquidate you!
📢 Post by @DeFiTitan
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