Liquidation Engine: How Crypto Platforms Force Trades and Lose Millions

When you trade crypto on margin, a liquidation engine, a automated system that closes losing positions to prevent further losses. It's not a feature—it's a failsafe built into every major exchange to protect itself, not you. This system watches your leverage, your collateral, and your entry price. When the market moves against you by even a few percent, it doesn’t ask. It doesn’t warn. It just hits the kill switch and sells your position at whatever price it can get. That’s how people lose everything overnight.

Behind every forced liquidation, the automatic closing of a leveraged position when collateral falls below required levels is a crypto exchange risk, the exposure platforms take when users trade with borrowed funds. Exchanges like Vauld, FTX, and others didn’t just fail because of bad management—they failed because their liquidation engines couldn’t handle mass panic. When Bitcoin dropped 40% in hours, thousands of positions were wiped out at once. The engine couldn’t find buyers fast enough. Prices crashed further. And suddenly, the exchange owed more than it had. That’s not a bug. That’s the design.

It’s not just about leverage. The margin trading, borrowing funds to amplify crypto positions, often with high risk model depends entirely on the liquidation engine working perfectly. But perfect doesn’t exist. In Iran, people used crypto to escape hyperinflation—but many got liquidated because their wallets were tied to exchanges that didn’t have enough reserves. In Myanmar, traders got jailed for using USDT, but some lost everything first because their leveraged positions were auto-closed by an algorithm that didn’t care about politics. In South Korea, Coinone lets you stake, but if you trade with 10x leverage, your position can vanish in seconds.

What you see in the news—$4 billion flowing out of Iran, Vauld collapsing, BEPSwap disappearing—isn’t just market volatility. It’s the liquidation engine doing its job. Too well. It’s not designed to help you win. It’s designed to stop you from breaking the system. And when the system breaks anyway, you’re the one who loses.

Below, you’ll find real stories of people caught in these systems. Some lost their life savings. Others found ways to avoid them. No fluff. No hype. Just what happened, why, and how to spot the next one before it’s too late.