A chain reaction of forced sell-offs that occurs in an overheated or overleveraged cryptocurrency market. When an asset’s price drops close to its liquidation threshold, lending protocols or exchanges automatically sell part of the trader’s collateral to cover losses. These sales put additional pressure on the market, triggering further liquidations and creating a snowball effect. As selling pressure intensifies and investor panic grows, many rush to close their positions. Ultimately, cascading liquidations affect not just a single asset but the entire market.