Cowen's prediction considers historical halving cycles, institutional adoption patterns, and macroeconomic liquidity conditions.
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Liquidation cascades occur when leveraged positions are forcefully closed after price drops, amplifying corrections. Once prices fall enough to trigger margin calls, exchanges automatically sell assets to cover losses. This selling pressure pushes prices lower, causing more liquidations in a chain reaction. High leverage across markets increases the risk of such cascades, leading to steep, sudden declines. Traders closely watch liquidation levels to anticipate these events. While cascades accelerate downturns, they also reset leverage and often mark local bottoms, providing fresh entry points for disciplined investors. Their impact underscores the dangers of excessive leverage in volatile markets.
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Sudden APR jumps in liquidity pools may suggest imbalances or short-term incentives. Such conditions often attract capital until rates normalize.
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