How does margin calling affect the volatility of digital currencies?

1 answers

• Feb 17, 2022 · 3 years ago
  Margin calling has a direct impact on the volatility of digital currencies. When traders use margin to increase their buying power, it introduces additional risk into the market. If the market moves against these leveraged positions, margin calls are triggered, which can result in forced liquidations. This sudden influx of selling pressure can lead to increased volatility as it creates a sense of panic among traders. Additionally, margin calling can also amplify market sentiment, as traders who receive margin calls may be more inclined to sell off their positions, further contributing to price fluctuations. Therefore, margin calling is an important factor to consider when assessing the volatility of digital currencies.
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