What is liquidation in crypto? Health factors & more
The post What is liquidation in crypto? Health factors & more appeared on BitcoinEthereumNews.com. Liquidation is the moment crypto’s leverage machinery takes your collateral, and it happens two very different ways: exchanges force-closing leveraged trades, and DeFi lending protocols auctioning borrowers’ collateral to keeper bots. This guide explains both systems, the health factor math, the bonus liquidators earn, why liquidations cascade into crashes, and how to read the daily liquidation numbers everyone quotes and few understand. Summary Liquidation is crypto’s automated way of keeping leveraged systems solvent without identity, courts, or credit scores. Exchange liquidations force-close leveraged trades, while DeFi liquidations repay unhealthy loans by selling borrower collateral. In DeFi lending, the health factor is the core warning signal: above 1 is safe, below 1 is liquidatable. Liquidation cascades happen when forced selling pushes prices lower and triggers the next layer o