Liquidation – a word that many beginners in the crypto world misunderstand. Many think it means profits, but it’s the opposite: liquidation means you have suffered significant losses and your position is forcibly closed.

If you've been following the news lately, you constantly see headlines like "Bitcoin rises, 100,000 liquidations!" or "Bitcoin falls, 200,000 liquidations!". That sounds confusing, right? How can Bitcoin rise and people still get liquidated? That’s exactly what I want to explain to you today.

First: What is liquidation actually?

Simply put – liquidation means you ran out of money. Imagine you borrow money from an exchange to trade Bitcoin with leverage. The price moves against your expectation. Your capital shrinks. If the loss consumes your entire margin plus your own money, the exchange automatically closes your position. This process is called liquidation.

Why does this happen at all?

The main problem: leveraged trading. With leverage, you can move a lot with little money. You have 1,000 yuan, but want to invest 10,000 yuan in Bitcoin with 10x leverage. Sounds attractive – if Bitcoin rises by 10%, you earn 1,000 yuan, and your capital doubles! But if Bitcoin falls by 10%, you lose your entire 1,000 yuan. Liquidation.

Leverage is like a double-edged sword. It amplifies your gains but also multiplies your losses.

How can Bitcoin rise and still be liquidated?

Simple: you guessed the wrong direction. In crypto trading, you can bet on rising prices (long) or falling prices (short). If you bet on falling prices – meaning you expect Bitcoin to fall – and the price suddenly rises sharply, you get liquidated. Your loss exceeds your capital.

Example: A trader believes Bitcoin will fall. He goes short with 10x leverage. But suddenly, the price rises by 15%. His prediction was wrong. His losses exceed his capital. Liquidation.

In case of a sharp decline, it’s the opposite: buyers (long positions) get liquidated because the price falls too quickly.

Why are the liquidation numbers so high?

Because many people trade with leverage. They want to make quick profits. When the market becomes volatile and moves quickly, many get liquidated at the same time. Especially when market sentiment is overly optimistic or pessimistic, many bet in the same direction. When the market turns, chain liquidations follow – one after the other.

How do you avoid liquidation in the crypto world?

First rule: Don’t use high leverage. The higher the leverage, the greater the risk. As a beginner, you should not use leverage at all.

Second rule: Set stop-loss points. Define beforehand at what loss you will exit. This way, you stop in time before liquidation happens.

Third rule: Control your position size. Don’t put all your capital into one trade. Keep reserves for market fluctuations.

Fourth rule: Don’t follow the crowd blindly. During strong fluctuations, emotional trading leads to losses. Stay rational.

The bottom line in one sentence: liquidation doesn’t happen because Bitcoin rises or falls – but because you guessed the wrong direction and the leverage was too high.

The crypto market offers real opportunities but also real risks. Especially at the beginning, it’s important to stay away from high-risk leverage trades and control your risk. Success is not luck – it belongs to those who are prepared. If you feel uncertain right now and want to learn more about the crypto world, follow me. That way, you won’t miss any important developments.