Where Does Your Money Go When You’re Liquidated? 🤯💸
Ever wondered what happens to your hard-earned money when you're hit by a liquidation? Here’s the shocking truth: 👇
1️⃣ The Exchange (e.g., Binance) 🏦
The first stop? The exchange. They pocket the liquidation fee, which is taken directly from your collateral. It’s their way of ensuring smooth operations while profiting from your misstep.
2️⃣ The Counterparties (Other Traders) 📈 vs. 📉
Your loss could be their gain! When your position is forcibly sold, the proceeds often go to other traders on the opposite side of the trade, covering their profits.
3️⃣ The Insurance Fund 🛡️
If there’s any leftover money after debts and fees, it’s redirected to the exchange’s insurance fund. This fund protects the system from catastrophic losses during extreme market conditions.
Who Benefits from Your Liquidation?
✔️ Binance (or your exchange of choice) gets the fee.
✔️ Counterparties cash in on their profits.
✔️ The insurance fund grows stronger.
💡 Moral of the story: When you're liquidated, others profit from your pain! Stay informed, manage your risks, and trade wisely.
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