Glossary
Liquidation
An engine force-closing a leveraged position when losses exceed the collateral posted.
A leveraged position can be closed automatically by the exchange when the loss against the collateral reaches a set threshold. The collateral is taken to cover the debt, usually with a penalty fee.
In practice this happens on moves that look unremarkable on a daily chart. Crypto can move several percent in minutes, and leverage that would survive a normal day can be wiped out by a single wick.
Keeping a liquidation price well away from the current price is the whole point. Most losses that people did not expect came from a position whose liquidation line was closer than it looked.
Related terms
Airdrop
Free tokens distributed to wallet addresses, usually to reward early users of a protocol.
AMM
Automated Market Maker — a protocol that prices assets with a formula instead of an order book.
APR vs APY
APR is the yearly rate without compounding; APY includes compounding and is always higher.
ATH
All-Time High — the highest price an asset has ever traded at.
Bear Market
A prolonged decline, conventionally 20% or more from recent highs.
Bull Market
A prolonged rise driven by new demand, easy credit and rising confidence.