In the cryptocurrency trading realm, liquidation occurs when a trader's position is closed by a broker or trading platform because the trader has failed to maintain the necessary margin requirements. If the market moves against a trader's position and their account balance becomes insufficient to cover potential losses, the exchange will liquidate their assets to recover funds. Liquidation can occur in various forms: forced liquidation due to margin calls, voluntary liquidation when traders close their positions to realize profits or stop losses, and systematic liquidation during significant market downturns to minimize further losses.