Liquidation cascade

A liquidation cascade doesn't measure any single number. It describes a mechanical sequence: the size and price-proximity of leveraged positions stacked at each price level, and how forcefully those positions get closed once price reaches them. A liquidation heatmap is the tool that shows the raw material a cascade runs through, plotting where longs and shorts sit clustered by leverage tier so you can see how much stacked exposure sits within a given percentage move of the current price.

Read a cascade by watching how fast price moves through consecutive clusters rather than by any single liquidation event. A single $2 million long liquidation in Bitcoin barely dents a market trading tens of billions in daily volume. A cascade shows up as a fast, near-vertical move on the chart, accompanied by a spike in the live liquidation feed: longs stacking on longs as price falls, or shorts stacking on shorts as it rises. The steeper and faster the move, the more likely forced closes are doing real work rather than organic selling or buying alone.

A cascade is a description of what already happened, not a forecast. Seeing a heavy cluster sitting below spot tells you a cascade could start there if price gets there, not that it will. Plenty of clusters sit untouched for days while price simply avoids that level. It also can't isolate how much of a move came from forced closes versus voluntary selling that started the whole thing; both blend into the same candle. And a cascade in one leverage tier doesn't necessarily spread to the next. A thin gap between clusters can stall it just as easily as a thick one can extend it.

Bitcoin is trading at $114,000 with a dense cluster of 25x-leveraged longs mapped between $111,500 and $112,000. A piece of negative news knocks price down to $112,200, close enough to start triggering the first wave of forced sells. Those sells push price to $111,800, which is now inside the next cluster down, and the process repeats, dropping price to around $109,600 in under ten minutes before the leveraged supply thins out and the selling pressure fades. The move looks abrupt on a candle chart, but it's really several thousand individual forced closes compounding on each other in sequence.