Cryptocurrency Encyclopedia

Adverse price movements: If the price of Bitcoin moves against the trader's position, their margin balance will decrease. If the price movement is large enough, the trader's margin balance may fall below the liquidation level, and their position will be closed.
Insufficient margin: Traders must maintain a sufficient margin balance in order to cover potential losses. If a trader's margin balance is too low, they are more likely to be liquidated if the price of Bitcoin moves against them.
High leverage: Leverage is a tool that allows traders to increase their potential profits. However, it also increases the risk of liquidation. If a trader uses too much leverage, a small price movement against them could result in liquidation.
Trading against the trend: Trading against the trend is a risky strategy that can lead to liquidation. If the price of Bitcoin is trending up, traders who are selling perpetual contracts are more likely to be liquidated if the price continues to rise.

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