“And that’s an
automatic liquidation feature that would
take place if someone’s account or their
collateral drops in price. It’s
essentially like a margin call.”
And that’s all you need to know. There’s no SEC for crypto, and you can buy it with 10% margin or less. You have not been able to buy stocks with 10% since 1929 - and everyone knows what happened then.
Crypto is being bought on 10% margins?
Wonder how many are aware of that - I was today years old when I found out.
Perhaps it is the realization that they are paying a premium for what amounts to digital ledger paper. Yes, I get blockchain, encryption, md5, etc.
I wouldn’t characterize it as being like a margin call. Rather, it is like a “stop” — which people and institutions put in place in case their asset drops to a certain level. A “stop” triggers liquidation.
The word “cascade” was used; and I can’t think of a better word than that.