2026-01-08 17:28:28

The Truth About Liquidations in Crypto (2/3) — The Deadly Spiral of Long and Short Squeezes

Why do longs get liquidated when the market is hot? Simply put, it's this routine: you’re bullish, borrow 90,000 to add to your 10,000 to buy 100,000 worth of coins. As a result, if the coin price drops by 10%, the platform forcibly sells your position. Originally, the coin only lost a small amount of money, but due to leverage, you’re completely wiped out of the market. When the coin rebounds? It’s none of your business; your position is already gone.

What about shorting? The logic is reversed. It seems safer but is actually more dangerous. Borrow one coin to sell for 100,000 yuan, then buy back at a lower price if the price drops. Sounds fine. But if the coin rises by 10%, you need 110,000 to buy back the coin and repay the debt, and the platform will still forcibly close your position. The same result — game over.

The most terrifying are extreme market conditions. Bitcoin’s daily volatility can be ±20%, and if you’re using 10x leverage? It’s a direct explosion. Even more extreme — a flash crash — instantly drops to your stop-loss level, triggering liquidation, then the coin price surges back, and you’re already out. There’s also liquidity exhaustion: trying to close a position but no one is willing to take the other side, watching your liquidation execute helplessly.

The data is clear: In 2022, during the LUNA collapse, the liquidation amount within 24 hours reached $10 billion. In March 2023, over 200,000 people were liquidated in a single day. Do the math — 10x leverage with a 10% move wipes out your principal; 100x leverage, a 1% move, and you’re out.

What platforms won’t tell you is that the execution price of liquidations is often more brutal than the theoretical value. The interest on high leverage accumulates daily, seemingly small but actually draining your blood. That “market price liquidation”? Most of the time, it executes at the worst possible price.

Remember this: leverage is not a trading tool, it’s a gambling device. Platforms are not partners; they are the house.

BTC0,34%

LUNA-1,07%

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SatoshiSherpa

· 01-10 06:39

10x leverage drops 10% and it's wiped out instantly. I just want to ask, who else dares to play with this stuff?

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SmartContractPlumber

· 01-09 18:14

This is a true reflection of contract vulnerabilities; the permission control has failed. The platform's forced liquidation mechanism is essentially like a reentrancy bug—if you can't react in time, you're forced out. Long and short positions are fundamentally the same—they're both trapped in the pitfalls set by the market makers. The interest aspect is particularly ruthless—what seems like a small fee rate is actually an integer overflow-style money grab. The 10 billion LUNA liquidation— isn't that just the aftermath of a bug caused by contract upgrades? Formal verification should have been done before deployment; such systemic risks should have been intercepted early. Speaking of which, the risk architecture design itself is flawed. The execution price spread that the platform doesn't disclose is, in a way, an abuse of authority—you have no real control over your positions. Ten times leverage and a 10% move liquidates your position—that math checks out, but what you should really scrutinize is the platform's liquidation logic.

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MelonField

· 01-08 17:57

A bloody lesson, that needle insertion really hit home. I've seen firsthand how many people are drained of their last penny just like that.

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TopEscapeArtist

· 01-08 17:47

Here we go again with the same old tricks, always thinking I can buy the dip and turn things around, but before the MACD even crosses, I get liquidated. This thing with setting stop-losses is really something else; once triggered, you're out immediately, and by the time the rebound comes, you're already a leek. 10x leverage with a 10% fluctuation and your principal is gone? Last time I used 20x, that was a disaster. The bearish signals were right in front of me, but I just ignored them. Market price liquidation on the platform is a joke; the price difference is huge. I initially wanted to control losses, but I ended up losing even more. This is the real death spiral—coin prices rebound, but it has nothing to do with me.

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0xInsomnia

· 01-08 17:47

Bro, this article is really hitting the nail on the head. I just want to ask, how many people truly understand this death spiral? Tenfold leverage with a 10% fluctuation means losing your principal entirely—this is not trading, it's gambling. --- The platform's claim of "market price liquidation" is just a scam; executing at the worst price is guaranteed. They play the cut the leeks game very skillfully. --- That billion-dollar liquidation during the LUNA crash—how many people remember how much they lost back then? Playing with leverage almost always ends like this. --- A sudden spike triggers stop-loss orders, and then the price rebounds—this trick we've seen too many times; there's no way to defend against it. --- Leverage trading is just the platform's cash cow. Why are people still rushing in? --- Long or short, it's all death. As long as you use leverage, you can't escape the fate of liquidation. That's just how it is.

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ser_we_are_ngmi

· 01-08 17:30

Poking once and going out immediately, then the price surges back is very ironic; the whales are making a killing.

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Fren_Not_Food

· 01-08 17:29

100x leverage, 1% exit, this is totally a gambling game. The platform has long been making a fortune.

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