Plain-English definition
When a borrower's collateral drops below the required buffer, the protocol sells it automatically to repay the loan. The borrower does not get a phone call; the code acts.
Liquidations cluster. A falling price triggers sales, which push the price lower, which triggers more, a cascade. Reading where large positions sit relative to their liquidation prices is reading where the cliffs are.
Why it matters
Liquidation matters because crypto markets can look precise while still being shallow, crowded, or poorly sourced. A useful read is not just the number. It is the number, the size behind it, the context around it, and the part it cannot explain.
Simple example
A simple Liquidation example is a reader comparing two venues with the same headline price but different depth. The deeper venue can absorb more capital before the trade, peg, or yield reading starts to move against the user.
How Bathymark uses this term
Bathymark uses Liquidation to translate open market data into live liquidity readings. When the term touches a live page, the reading links back to the relevant chain, protocol, stablecoin, DEX, perps, or Signal so the source remains checkable.
Common mistake
The common mistake is treating Liquidation as a complete signal by itself. Bathymark treats it as one instrument: useful when read beside liquidity, source, size, and what the number cannot prove.