What Is Liquidation in Crypto Trading?

Imagine a trader who opens a Bitcoin trade with 1:10 leverage after reading market analyses and listening to yet another "guru." If the market moves just 10% against the position, the trader's margin is wiped out, and the exchange automatically closes the trade.This process is called liquidation: the exchange closes the trader's leveraged position and uses margin to cover borrowed funds. Such events are common. In May 2021 alone, approximately $8 billion worth of crypto positions were liquidated