I just finished watching a video from Coin Bureau, and it was a real eye-opener about a huge risk in the crypto world: liquidations. I had heard about these, but I didn't really understand them until now. Basically, it's what happens when a trader's leveraged position gets automatically closed by an exchange because the market moved against them. The video explained that leverage is just borrowing money to trade with, and while it can amplify your gains, it can also destroy your portfolio if the market goes the other way.
I learned about the difference between isolated and cross margin. With isolated margin, you only risk a specific amount of capital you've put into a trade, but with cross margin, your entire account balance is on the line. I also got a better grasp of what a "liquidation cascade" is, which is when a bunch of liquidations in a row cause prices to drop even further, triggering even more liquidations. The video also touched on perpetual futures and funding rates, which are apparently a good way to gauge market sentiment and predict a possible reversal.
The biggest takeaway for me was the advice on how to stay safe. The video made it clear that the easiest way to avoid being liquidated is to simply not use leverage. Sticking to spot trading means you can't be forced out of your position by a sudden price swing. However, if you do decide to use leverage, it should be modest and used to reduce risk, not amplify it. It was a solid reminder that keeping your stack off an exchange and managing your ego are the keys to surviving the chaotic crypto market.