liquidation events: How to avoid them on the cryptocurrency market
The increase in the Crypto currency brought incomparable financial freedom and accessibility. However, as the market has grown, you have concern for the volatility of the market, regulatory uncertainty and potential risks associated with the purchase and sale of cryptocurrencies. One of the most significant threats faced by the cryptocurrency investors is a liquidation event-a council in which the buyer’s account is frozen or closed for non-payment.
In this article, we will explore what the liquidation event is on the CRIPTO currency market, how it happens and what is most importantly, how to avoid it.
What is the liquidation event?
The liquidation event occurs when the buyer’s wallet frozen platform, exchange or other mediator for non -payment or other reasons. This can happen when the investor submits an order to buy a crypto currency at a market price, but does not fulfill its obligation when the time comes.
Types of liquidation events in the cryptocurrency market
There are several types of liquidation events that can happen:
- Frozen accounts : The customer’s account is frozen for non -payment or other reasons, preventing them from approaching their means.
- Closing an order : Order is a canceled platform or exchange, leaving the buyer without a way to complete the transaction.
- Block freezing : In one move, multiple orders are blocked, preventing customers to perform multiple transactions at once.
How are the events of liquidation happen?
Liquidation events can occur for various reasons, including:
- Excessive Calls of margins : Investors who have set up great obligations can receive excessive calls to the margin when their positions become too unstable.
- Insufficient funds : Customers may not have enough means to complete the transaction or they can freeze them with a large amount of trading markets.
- Platform or exchange regulations : governments and regulatory bodies may impose stricter regulations on the exchange of cryptocurrencies, leading to liquidation events.
How to avoid liquidation events in the cryptocurrency market
Although there is no flawless way to avoid all liquidation events, here are some strategies that can help reduce your risk:
- Set real expectations : be careful from extremely high yields or guaranteed profits; They can be unsustainable and lead to liquidation.
- Diversify your portfolio : Spread your investments in multiple crypto currency to reduce your risk.
- Use stopping orders : Set up stopping orders to limit potential losses if the store does not perform as expected.
- Monitor Volume of Trading : A great volume of trading may increase the likelihood of liquidation events, so closely monitor your positions.
- Use reputable exchange and platforms : Explore and select distinguished exchange and platforms to reduce the risk of liquidation events.
- Stay informed
: Be ongoing with market news and regulatory updates to anticipate potential risks.
Conclusion
Liquidation events in the cryptocurrency market may be devastating for investors who have put their money in their turn. However, since you are aware of the type of liquidation events that take place and take steps to reduce the risk, you can avoid them or at least alleviate the impact if there is a liquidation event. Always remember to be informed, set real expectations and diversify your portfolio to protect yourself from potential losses.
Important Note : This article is only for general information purposes and should not be considered as an investment advice. Investments in the cryptocurrency currency are highly risky and may result in significant losses. Always have a thorough research and consult with your financial advisor before making any investment.