Liquidation Cascade vs Liquidation Skew

A self-reinforcing sequence of forced position closures in which one tier of liquidations drives price movement that triggers the next tier; the mechanism behind crypto's most extreme price crashes; most severe when open interest is high and leverage concentration is elevated.

The distribution of open positions by price level, showing where the largest concentrations of forced-close triggers are located relative to current price; large clusters above current price represent potential short squeeze fuel; large clusters below represent potential long cascade triggers.