June 28 (Cointime) - Liquidation is a process in the cryptocurrency industry where a trader's position is forcibly closed by the exchange or platform if they are unable to meet the margin requirements. This mechanism is designed to protect both traders and the platform from excessive losses. When trading on margin, traders can borrow funds from the exchange or platform to amplify their trading positions, but this also increases potential losses.

If the value of a trader's position declines to a point where their account's equity falls below the required margin, the exchange may initiate the liquidation process. While liquidation is an important risk management tool, traders should be aware of the risks involved in margin trading and monitor their positions closely to avoid liquidation.