What Is Liquidation?

Liquidation occurs when a leveraged trading position is forcefully closed because the trader's margin is no longer sufficient to cover potential losses. In crypto, liquidations can cascade: as positions are liquidated, forced selling pushes prices lower, triggering more liquidations. Whale-induced price movements that trigger mass liquidations are visible in on-chain data as large sell volumes followed by rapid price recovery. Sonar Tracker monitors whale activity around known liquidation clusters to help traders avoid being caught in liquidation cascades.